Tax Exemption to National Pension System

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

RAJYA SABHA

STARRED QUESTION No. *285

TO BE ANSWERED ON TUESDAY, THE 28th MARCH, 2017

7,CHAITRA, 1939 (SAKA)

TAX EXEMPTION TO NATIONAL PENSION SYSTEM

*285. SHRI N. GOKULAKRISHNAN:

Will the Minister of FINANCE be pleased to state:

(a) whether it is a fact that the maturity amount of the National Pension System has no tax benefits like Public Provident Fund (PPF) and Employees’ Provident Fund (EPF);

(b) if so, the details thereof;

(c) whether Government has received any representation requesting to provide tax exemption to NPS at par with PPF and EPF; and

(d) if so, the stand of Government in this regard?

ANSWER

THE MINISTER OF FINANCE

(SHRI ARUN JAITLEY)

(a)to (d):- A Statement is laid on the Table of the House.

Statement referred to in reply to parts (a) to (d) of Rajya Sabha Starred Question No.*285 for 28th March, 2017 by Shri N. Gokulakrishnan, MP reg. Tax Exemption to National Pension System.

(a)&(b) Prior to Finance Act, 2016, National Pension System (NPS) referred to in section 80CCD was Exempt, Exempt and Tax (EET) i.e., the monthly/periodic contributions during the pension accumulation phase were allowed as deduction from income for tax purposes; the returns generated on these contributions during the accumulation phase were also exempt from tax; however, the terminal benefits on exit or superannuation, in the form of lump sum withdrawals, were taxable in the hands of the individual subscriber or his nominee in the year of receipt of such amounts unlike PPF and EPF which have been enjoying EEE regime i.e. Exempt, Exempt, Exempt.

Vide Finance Act, 2016, section 10 of the Income-tax Act was amended to provide that any payment from National Pension System Trust to an employee on account of closure or his opting out of the NPS shall be exempt from tax, to the extent it does not exceed forty percent of the total amount payable to him at the time of closure or his opting out of the scheme. Further, Section 80CCD was also amended by Finance Act, 2016 to provide that the whole amount received by the nominee of NPS subscriber on his death shall be exempt from tax.

Further, vide Finance Bill,2017 as passed by the Lok Sabha on 22.03.2017, it has been proposed to exempt partial withdrawals by employees from their NPS accounts in accordance with the guidelines prescribed under Pension Fund Regulatory and Development Authority Act,2013.

Furthermore, it has also been proposed in the Bill to amend section 80CCD of the I.T.Act,1961 so as to increase the upper limit of deduction for contribution into NPS from ten per cent of gross total income to twenty per cent in case of individual other than employee.

(c) &(d) Yes, Madam, the Government has received such representations in the past and the stand of Government was reflected in the amendments made in Income-tax Act vide Finance Act,2016 and Finance Bill 2017 as discussed above.