PPF gets more favourable tax treatment: Pension regulator
January, 21st 2008
The present tax system is more favourable to saving products like Public Provident Fund and Employee Provident Fund while investment in New Pension Scheme is subject to tax at the time of withdrawal, D Swarup, Chairman, Pension Fund Regulatory Development Authority said.
"This goes against the basic philosophy of encouraging contractual savings, which provide long-term funds for investment," he told a seminar on pension sector reforms organised by Bombay Chamber of Commerce and Industry.
He pointed out that withdrawal from schemes like PPF earlier than the specified term is relatively easy compared to investment made in pension scheme where terms for premature withdrawal are very strict.
Besides, he said PPF is only for 15 years whereas pension money is invested for 30 to 35 years. "All over the world, contractual savings are given maximum tax benefit," he said, adding he has taken up the issue with the government and hopeful about receiving a favourable response.
He told PTI since the New Pension Scheme came into being from January 2004 under which all new recruits in government service come under, an estimated Rs 2,500 crore have been collected by way of contributions from the employees. However, the said money has gone to the government.
He said the PFRDA has appointed three fund managers, State Bank, UTI Asset Management Company and LIC as pension fund managers who are expected to start work by March 31 this year PFRDA would also appoint a custodian bank soon.
"We hope that the NPS contributions of the employees of the central government and 19 state governments would be transferred to the three fund managers by the start of the new financial year," he said.