New Delhi, December 10: The Finance Ministry on Monday confirmed the approval given by Union Cabinet to make five key changes to new National Pension Scheme. Among the decisions given ascent to by the Cabinet, includes raising Central Government's contribution to 14 per cent.

The approval comes in the backdrop of a year-long agitation by the Central Government employee unions, led by All India Railway Federation (AIRF) chief Shiv Gopal Mishra. The Federation had recently blocked the convoy of Railway Minister Piyush Goyal during an event in Lucknow.

As per the statement issued by the Government, following changes to the  National Pension System have been approved:

  • Enhancement of the mandatory contribution by the Central Government for its employees covered under NPS Tier-I from the existing 10% to 14%.

  • Providing freedom of choice for selection of Pension Funds and pattern of investment to central government employees.

  • Payment of compensation for non-deposit or delayed deposit of NPS contributions during 2004-2012.

  • Tax exemption limit for lump sum withdrawal on exit has been enhanced to 60%. With this, the entire withdrawal will now be exempt from income tax. (At present, 40% of the total accumulated corpus utilized for purchase of annuity is already tax exempted. Out of 60% of the accumulated corpus withdrawn by the NPS subscriber at the time of retirement, 40% is tax exempt and balance 20% is taxable.)

  • Contribution by the Government employees under Tier-II of NPS will now be covered under Section 80C for deduction up to Rs. 1.50 lakh for the purpose of income tax at par with the other schemes such as General Provident Fund, Contributory Provident Fund, Employees Provident Fund and Public Provident Fund provided that there is a lock-in period of 3 years.

While the government is yet to decide on the date of notification of the new scheme, sources said such changes usually come into effect from the beginning of a financing year, meaning April 1, 2019.

(With PIB inputs)

(The above story first appeared on LatestLY on Dec 10, 2018 03:48 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).