Union Finance Minister Arun Jaitley on Monday said the Centre will increase its contribution to the National Pension System for central government employees to 14% from the current 10%, PTI reported. Employees currently contribute 10% to the pension scheme. The pension scheme was initially begun only for government employees but was thrown open to everyone in 2009.
The decision was taken at a meeting of the Union Cabinet last week. The entire amount that is withdrawn will be made tax-free at the time of retirement, he added. The changes have been made in the “larger interest of employees”, Jaitley said.
Currently, under the National Pension System, on retirement, the subscriber can withdraw 60% of the accumulated funds and the remaining 40% can be used to buy an annuity so that the subscriber can get a regular income for the rest of their life. While the 40% for buying an annuity was not taxable, of the 60% withdrawn, 20% was taxable. According to the new rules, this entire 60% will not be taxed.
The move is likely to benefit about 18 lakh central government employees, according to Mint. This will cost the government about Rs 2,840 crore for the financial year 2019-2010 and will recur.
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