NPS: PFRDA seeks tax exemption on employers' contributions in line with provident fund
PFRDA) has requested for increased tax exemption on employer contributions to employees' pensions in order to align it with provident fund. The employer's contribution to provident fund is deductible up to 12 percent of the salary (basic + dearness allowance) up to the maximum limit of ₹7.5 lakh. Interest on this contribution is tax-exempt.
Conversely, under the National Pension System (NPS), the employer's contribution towards NPS is only exempt up to 10 percent of salary (basic + dearness allowance). Deepak Mohanty, chairman of PFRDA, was quoted in the media as saying, "We have requested it to increase it to 12 percent to align it with EPFO. Our goal is to make it 14% because in the case of government employees, contributions up to 14 percent are tax free." Mohanty was in Mumbai to meet distributors and other stakeholders in the NPS to expand the subscriber base.
He also mentioned that NPS has outperformed all equity benchmarks with equity funds delivering returns of 24.2 percent over one year, 18.4 percent over three years and 13.3 percent since inception. The central government scheme, which is a blend of debt and small equity portion, has given a return of 9.46 percent since inception, as per a TOI report. However, regardless of the scheme's performance and the ease of investing, flexibility it provides through systematic withdrawals remains low.
In the private sector, the subscriber base is only 51 lakh with AUM of a little over ₹2 lakh crore as of Dec 23, said the report. “We aimed to attract 13 lakh subscribers during the current financial year. We have added around 5.3 lakh subscribers so far and are focusing on expanding awareness through campaigns, distributors and social media," said Mohanty.
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