New Changes in National Pension Scheme
In the case of government employees, the Cabinet Thursday raised the government’s contribution to National Pension Scheme (NPS) to 14 percent of basic income from 10 percent, sources said.
Minimum employee contribution will, however, remain at 10%.
The Cabinet also approved tax incentives under the Income Tax Act for employees’ contribution to the extent of 10%, they added.
Presently, the government and employees contribute 10% of basic salary to NPS. While the minimum contribution remains at 10 percent, the contribution has been increased from 10% to 14%.
The Cabinet, headed by Prime Minister Narendra Modi, also hosts a 60% of the accumulated fund at the time of retirement, up from 40% at present.
Also, employees will have the option to invest in fixed income instruments or equities, sources said.
As per the Cabinet decision, if the employee decides on the contribution of the accumulated fund in NPS at the time of retirement and transfers 100% to annuity scheme, then his pension would be more than 50% of his last drawn pay, sources said. The government did not announce the decision in the ensuing polls in Rajasthan Friday.
While the government is still in the process of being notified of the new scheme, sources said such changes usually come into effect from the beginning of a financing year, meaning April 1, 2019.
This formula has been developed by the Ministry of Finance on the recommendation of a government-appointed committee.
The government employees will be allowed to withdraw at the time of retirement. The Cabinet has had the power to commute 60 per cent of the accumulated fund to the time of retirement, up from 40 per cent at present. As per the Cabinet decision, if the employee decides on the contribution of the accumulated fund in NPS at the time of retirement and transfers 100 per cent to annuity scheme, then his pension would be more than 50 percent of his last drawn pay , sources said.
The government employs the option to invest in fixed income instruments or equities.
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