National Pension System Current Affairs - 2019

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OCI can now apply for National Pension System

The Overseas Citizens of India (OCI) will now be eligible to apply for National Pension System (NPS) at par with Non Resident Indians (NRIs). The permission to permit OCI to enroll in NPS was given by Pension Fund Regulatory and Development Authority (PFRDA). The decision is one of the endeavours of PFRDA towards promoting and developing NPS and increasing pension coverage in country.

Key Highlights

As per a notification issued by Finance Ministry, now, any Indian citizen, resident or non-resident and OCIs are eligible to join NPS till age of 65 years.

Condition: An OCI may subscribe to NPS provided such person is eligible to invest as per provisions of PFRDA Act and accumulated saving will be repatriable, subject to Foreign Exchange Management Act (FEMA) guidelines.

Till 26th of October 2019, the total number of subscribers under National Pension System (NPS) and Atal Pension Yojana (APY) has crossed 3.18 crores and Asset under Management has grown to over Rs.3.79 lakh crore. Subscribers enrolled under NPS includes more than 66 lakh government employees and 19.2 lakhs subscribers in private sector with 6,812 entities registered as corporates.

About National Pension System (NPS)

It was initially notified for Central government employees joining service on or after 1 January 2004. The NPS was subsequently adopted by almost all State Governments for its employees and was later extended to all citizens of India (on a voluntary basis) from May 2009, to corporates in December 2011 and to Non-Resident Indians (NRI) in October 2015.

A NPS subscriber can contribute regularly in a pension account during his/her working life, withdraw a part of corpus in a lumpsum and use remaining corpus to buy an annuity to secure a regular income after retirement.

In Union Budget 2019, the tax exemption limit under section 10(12A) of IT Act, for lump sum withdrawal on exit/maturity from NPS was increased from 40% to 60%. Moreover, the remaining 40% of corpus is already tax-exempt as it is mandatorily utilised for annuity purchase.

NOTE: PFRDA is a pension regulator of India. It administers and regulates National Pension System (NPS) and also administers Atal Pension Yojana (APY). It is a statutory authority established by PFRDA Act of Parliament, to promote, regulate and ensure orderly growth of NPS and pension schemes to which this Act applies.

Government raises its contribution in National Pension System to 14% from 10%

Union Cabinet has decided to raise contribution of Central Government to National Pension System (NPS) corpus of its employees from 10% to 14%. This will increase in eventual accumulated corpus of all central government employees covered by NPS. There are 18 lakh central government employees at present. The revenue impact from higher government contribution to employees’ corpus is expected to be around Rs.2,840 crore for 2019-20 and will be in nature of a recurring expenditure.

Government also has decided to make NPS fully tax free, making it on par with the provident fund scheme. It has decided to exempt income tax that is applicable on part of NPS corpus that is withdrawn on retirement. At present, while exiting scheme, 60% of corpus could be withdrawn and 20% of withdrawn amount is taxable. This portion now has been made tax free. The remaining part that could be used to buy annuities is anyway tax free. With this decision, NPS has acquired parity with provident fund savings, which are not taxed at any of three stages of saving, profit accrual or exit.

National Pension System (NPS)

It is easily accessible, low cost, tax-efficient, flexible and portable retirement savings account. It was launched in 2004 and was initially introduced for new Government recruits (except armed forces). It aims to institute pension reforms in country and to inculcate habit of saving for retirement amongst the citizens. Its objective is to provide retirement income to all the citizens. Under it, individual contributes to his retirement account. Employer can also co-contribute for social security/welfare of individual. It was extended for all citizens of country from May 2009 including the unorganised sector workers on voluntary basis. NPS is governed and administered by Pension Fund Regulatory and Development Authority (PFRDA). Currently, any Indian between age of 18 to 65 years may voluntarily join the NPS. NRI can open an NPS account, however contributions made by NRI are subject to regulatory requirements as prescribed by RBI and FEMA from time to time.