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Our Bureau

Mumbai, July 7 The new pension scheme (NPS) continues to be at a disadvantage vis-À-vis Employees’ Provident Fund (EPF) and the Public Provident Fund (PPF) as the Government has decided to continue with the Exempt-Exempt-Taxed (EET) method of tax treatment for the scheme.

The NPS participants were expecting a level playing field so that investment in the scheme would turn attractive.

Under the NPS, while individuals are exempted from tax at the contribution and accrual stages, the final redeemable amount is taxable.

The redeemable amount is exempt from tax only if the proceeds are invested in an annuity plan. Unlike the NPS, other administered savings schemes such as EPF and PPF are not taxed at any of the three — contribution, accumulation, and redemption — stages.

That is, they follow the Exempt-Exempt-Exempt (EEE) method of tax computation.

However, there is some reason to cheer for the subscribers of the NPS. The Government has decided to exempt income by way of dividend accruing to the NPS Trust from tax. The NPS Trust is responsible for the efficient management of funds.

It has also exempted all purchase and sale of equity shares and derivatives by the NPS Trust from the Securities Transaction Tax. Therefore, the pension fund managers can now shuffle the portfolio without having to pay securities transaction tax. This move will help grow the yield on investments as the advantage will be passed on the customers, said an analyst.

The Finance Minister has also announced that self-employed individuals can avail themselves of tax benefits under the NPS under Section 80 CCD of the Income Tax Act, 1961.

Hitherto, Section 80 CCD was providing tax benefit to a government employee or any other individual employed by any other employer. But it did not cover self-employed individuals.

More Stories on : Budget | Pension Plans | Taxation

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