The government should consider giving tax incentives to pension sector and expand its coverage to include people in the informal sector as they do not have any universal social security net, PFRDA Chairman Hemant G. Contractor said on Wednesday.
“We have sought parity in any tax treatment for NPS (National Pension System) from the government. Then also waiver of service tax on the purchase of annuity. Right now purchase of annuity attracts service tax so we have requested the government to do away with that, these are the two things we have asked the government to consider in the budget proposal,” he told reporters on the sidelines of the launch of a report on pension system by FICCI and KPMG.
People in the informal sector are not adequately covered under the pension scheme and something has to be done for this class of customers, he said.
“It is clearly a problem, it has to be addressed. Government alone cannot do this. People below poverty line don’t have the capacity to pay for the pension needs, so government financed schemes are must for them. We are discussing with the government to address these issues,” he said while delivering the inaugural address.
In India, only about 11-12 per cent of the working population belong to the organised sector and majority of them are well covered by the government pension schemes, he added.
But, the rest 88 per cent belong to the unorganised sector and they are very poorly secured under the pension schemes, he said.
“The problem in unorganised sector is because of the fact that we do not have any universal social security net like in the Western countries,” the Pension Fund Regulatory and Development Authority (PFRDA) Chairman said.
The FICCI-KPMG report pointed out the importance of considering higher tax deductions and giving more tax benefits to NPS.
“The survey highlights that pension relate to the existing salary levels and also must protect against inflation post retirement. In terms of tax benefits, it is important to consider higher tax deductions and giving more tax benefits to NPS,” said the report.
“Increasing life expectancy combined with the weakening joint family system makes it imperative for India to craft a comprehensive pension system to avoid old-age poverty and social distress”, said Parizad Sirwalla, Partner and Head, Global Mobility Services, Tax, KPMG in India.
