The Central government presents an appealing retirement income scheme for central government employees.
Under the scheme, Centre will contribute a handsome 14 percent of the basic salary of an individual in the National Pension System (NPS). The move is likely to benefit over 36 lakh central government employees.
Adding to this, now the individual contributions, although capped at a maximum of 10 percent of the basic salary, will be exempted from taxable income.
A cabinet meeting on Thursday approved of raising the government’s share in NPS to 14 percent. It also cleared tax incentives under Section 80C of Income Tax Act for employee contribution of up to 10 percent towards NPS. The cabinet also gave more flexibility to employees to withdraw the amount from NPS corpus at the time of retirement.
The central government employees would then be able to commute up to 60 percent of the NPS fund accumulated, up from 40 percent at present. If an employee decides not to commute any portion of the accumulated fund in NPS at the time of maturity and transfers 100 percent to annuity scheme, then his pension would be more than 50 percent of his last drawn pay.
Employees will also be given the option to decide on investing their annuity either in fixed income instruments or equities.
The government is yet to decide the date of notification of the scheme but sources say that it might come into effect from April 1, 2019.
National Pension System (NPS) is a government-sponsored pension scheme that was launched in January 2004 for government employees. However, in 2009, it was opened to all sections. It allows the employees to contribute regularly in a pension account during their working life. On retirement, they can withdraw a part of the corpus in a lump sum and use the remaining corpus to buy an annuity to secure a regular income after retirement.