PENSION SEEKS PF TAX STATUS

The pension regulator today demanded that the new pension scheme, which covers all government employees, be made tax exempt at the withdrawal stage like provident funds.“We have taken up this issue with the government and I am hopeful it will receive favourable consideration,” D. Swarup, chairman of the Pension Fund Regulatory and Development Authority (PFRDA), said at a workshop on the new pension scheme (NPS) here.At present, instruments such as the Employee Provident Fund (EPF), the Public Provident Fund (PPF) and the General Provident Fund (GPF) don’t attract any tax. Contribution, returns and withdrawals under PPF, EPF and GPF are exempt from tax, while in the NPS, only contribution and returns do not attract tax. However, withdrawal under the NPS attracts tax. This is called the exempt, exempt, tax system, unlike exempt, exempt, exempt system for PPF, EPF and GPF.“At present, the NPS is subject to the exempt, exempt, tax regime. On the other hand, EPF, GPF and PPF have a more favourable tax treatment. This goes against the basic philosophy of encouraging long-term contractual savings, which provide long-term funds for investment,” said Swarup.He said the NPS only replaces the old pension system and is not a substitute for other retirement benefits such as gratuity and leave encashment.A high-level task force appointed by the government is already looking into the matter and is in the process of framing detailed rules.Under the NPS, which is applicable for central government employees since January 1, 2004, employees have to contribute to their pension funds with matching contribution by the employer. – www.thetelegraph.com