The finance ministry is considering to extend tax advantage (EEE status) to the New Pension Scheme (NPS) in this years Budget, according to top government officials. This will bring the government-sponsored pension scheme on a par with other long-term investment plans such as the Public Provident Fund (PPF), Group Provident Fund (GPF), Employee Provident Fund (EPF) and life insurance policies.
While all these plans are exempt from tax at all the three stages of investment contribution, return and withdrawal NPS is taxed at the withdrawal stage.
The Pension Fund Regulatory and Development Authority (PFRDA) has been asking for a level playing field for a long time. As per the regulator, the tax disadvantage is one of the biggest impediments in the acceptance of the NPS by the informal sector. We have been asking for an equitable tax treatment for the last two years. And this year as well we have made a request to the government to consider this in the upcoming Budget, said PFRDA chairman D Swarup.