NPS is a pension-cum-investment scheme regulated by the Pension Fund Regulatory and Development Authority
- The Cabinet also gave nod to an increase to 60 per cent in income tax exemption limit applicable to lump sum withdrawal from NPS on exit.
- This move by the government will make the entire withdrawal from NPS on maturity exempt from income tax.
- At present, 40 per cent of the total accumulated corpus utilised for purchase of annuity is tax-exempt. Out of 60 per cent of the corpus withdrawn by the NPS subscriber at the time of retirement, 40 per cent is tax-exempt and but the remaining 20 per cent is taxable.
- The Cabinet also approved introduction of freedom of choice in selection of pension funds to central government employees.
- The latest changes in NPS rules will cost the exchequer around Rs. 2,840 crore for financial year 2019-20, the official statement noted.
- The government said that the proposed changes to NPS will be implemented immediately after "critical decisions are taken in consultation with the other concerned ministries/departments".
- The proposed changes in NPS will also lead to an increase in old-age security in a time of rising life expectancy, it said.
- New entrants to central government service after January 1, 2004 are covered under the National Pension System (NPS).
- The Committee of Secretaries, constituted to suggest steps for streamlining the NPS under Seventh Pay Commission, submitted its report earlier this year.
- NPS is a government-run pension-cum-investment scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA).
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