The Asian Age

Centre hikes NPS contributi­on by 4%

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New Delhi, Dec. 7: In a bid to make retirement income scheme more attractive for central government employees, the government has agreed to chip in a higher 14 per cent of the basic salary of an individual as its contributi­on to the National Pension System ( NPS), a top source said.

The move would benefit over 36 lakh central government employees.

Also, individual contributi­ons, which will continue to be capped at a maximum of 10 per cent of the basic salary, will be exempt from taxable income.

National Pension System ( NPS) is a government­sponsored pension scheme that was launched in January 2004 for government employees. However, in 2009, it was opened to all sections.

The scheme allows subscriber­s to contribute regularly in a pension account during their working life. On retirement, subscriber­s can withdraw a part of the corpus in a lump sum and use the remaining corpus to buy an annuity to secure a regular income after retirement.

Currently, the minimum employee contributi­on in NPS is 10 per cent of basic pay and an equal contributi­on is made by the government.

The Cabinet at its meeting on Thursday cleared raising the government’s share to NPS to 14 per cent, the source said.

It also cleared tax incentives under Section 80C of Income Tax Act for employee contributi­on of up to 10 per cent towards NPS. The tax measures are likely to come into effect from April 1, 2019.

Central government employees had approached the government seeking tweaking of the terms of the current ‘ contributi­on’ based NPS.

Also, the Cabinet has given more flexibilit­y to the government employees to withdraw the amount from NPS corpus at the time of retirement.

Once the changes are notified, central government employees can commute up to 60 per cent of the NPS fund accumulate­d, up from 40 per cent at present.

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