Tax benefits allowed in the Budget for investments made in the New Pension System (NPS) have had the desired result with the number of subscribers doubling in the last few weeks and many public sector entities approaching the regulator asking it to manage their pension corpus.
Just before the presentation of the Budget, the Pension Fund Regulatory and Development Authority (PFRDA) was struggling to get customers with less than 500 new subscribers joining the NPS in the two months after it was rolled out to all citizens on May 1, 2009.
The number of subscribers since the Budget has increased to more than 1,100, a senior PFRDA official said, adding that some public sector enterprises too have evinced interest in joining the NPS, wanting the regulator to manage their pension corpus.
"One or two public sector entities have approached us and they want their corpus to be managed by the NPS. However, discussions are at the preliminary stage and it would take a month or so for some clarity on the issue," the official said.
In the Budget, the government had accorded EET (Exempt, Exempt and Tax) status to investments made in the NPS, which meant a subscriber will only be taxed at the time of withdrawal. His investments and income on investments will be exempted till he withdrew the accumulated income. The Budget had also exempted the income of the pension trust from income tax and no levy of Securities Transaction Tax (STT) if the funds were invested in the securities market.
The NPS rolled out to general public from May 1 this year is applicable to all government employees, both state and central, since 2004. So far the PFRDA has spent Rs 1 crore on advertising and is likely to enhance the budget to Rs 8 crore to popularise NPS.