Union Finance Minister Nirmala Sitharaman in Budget 2019 proposed many changes to the income tax rules governing investment and withdrawal in retirement pension scheme NPS, though some of them were approved by the Union Cabinet last year.The finance minister increased the income tax exemption limit on withdrawal from NPS while also announced some additional tax benefits for central government employees who contribute towards the retirement scheme. Tax experts have welcomed the higher exemption limit on NPS but said that some the proposed tax benefits for central government employees should be also extended to other sections of the society.
These amendments will take effect from assessment year 2020-21. Some of the changes proposed to NPS are based on 7th Pay Commission.
“The government had made certain announcements in December 2018 in relation to NPS, wherein it raised its contribution to Tier I account for its employees from 10% to 14% and also announced that the tax benefit to such employees in respect of their own contribution to Tier II account will be available u/s 80C with a lock-in period of 3 years. The Finance Minister has proposed the changes in the Budget to implement the announcements. Further, the exemption of lump sum payment from NPS upon retirement is proposed to be raised from 40% to 60%, as also announced earlier,” said Kuldip Kumar, Partner & Leader, Personal Tax, PwC India….Read more>>