National Pension System streamlined: Government’s contribution to NPS hiked to 14 percent

The Union Cabinet on December 6, 2018, approved the proposal to streamline the National Pension System (NPS). The NPS was implemented in May 2009 to provide a pension option to 360 million informal sector workers and provide them with old-age income security. NPS is being implemented and regulated by the Pension Fund Regulatory and Development Authority (PFRDA).

Key Highlights:-

1. Mandatory contribution by the Central Government enhanced by 4 per cent from the existing 10 per cent to 14 per cent for employees covered under NPS Tier-I
2. Central government employees will be provided with freedom of choice for selection of Pension Funds and pattern of investment.
3. Payment of compensation for non-deposit or delayed deposit of NPS contributions during 2004-2012
4. Contribution by Government employees under Tier-II of NPS will now be covered under Section 80 C for deduction up to Rs 1.50 lakh for the purpose of income tax at par with schemes such as General (PF), Contributory PF, Employees PF and Public PF, with a lock-in period of 3 years.
5. The entire withdrawal will now be exempt from income tax as the tax exemption limit for lump sum withdrawal on exit has been enhanced to 60 per cent.

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