With a view to giving a major boost to the new pension scheme, the Union budget has proposed an additional tax deduction of Rs.50,000 for investments in National Pension Scheme (NPS) under Section 80 CCD. This will be over and above the deduction of Rs.1.5 lakh available under Section 80C of the Income-Tax Act. This is a welcome move to rope in more investors into NPS. However, investors are disappointed. For, the accumulated investment in NPS will continue to be taxable at the time of withdrawal.
Actually, >in an interview to The Hindu recently , PFRDA (Pension Fund Regulatory and Development Authority) Chairman Hemant Contractor said that the absence of EEE (triple E) status for NPS was preventing faster enrolment into the scheme.
Employee Provident Fund (EPF) and PPF schemes enjoy this status. EEE status (exempt-exempt-exempt in income-tax jargon) refers to the money that is deposited in EPF or PPF schemes and is exempt from income-tax under Section 80C. Any interest or returns earned during the accumulation phase is also exempted from income-tax Also, during withdrawal (after maturity), the money one gets is also exempted from income-tax.
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The government has, however, not made investments in NPS tax-free at the time of withdrawal. The accumulated corpus at the time of withdrawal will continue to be taxable. However, it is felt that the additional tax deduction and attractive returns will help rope in more investors into NPS.
Currently, NPS has more than 80 lakh subscribers with total asset under management of over Rs.76,000 crore.