Pension Current Affairs - 2019
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The Union Finance Minister Piyush Goyal announced the Pradhan Mantri Shram Yogi Mandhan scheme in the interim budget 2019 for workers in the unorganised sector.
About the Scheme
The features of the Pradhan Mantri Shram Yogi Mandhan scheme are:
- Under the scheme, an assured monthly pension of Rs 3,000 per month will be provided to workers in the unorganised sector after 60 years of age.
- To avail of the scheme, workers will have to contribute a minimal Rs 100 month per month.
- The scheme is expected to benefit 10 crore workers.
- This new pension scheme will run alongside the existing Atal Pension Yojana, which guarantees returns post-retirement.
The budget also increased gratuity limit from Rs 10 lakh to Rs 30 lakh from the next fiscal.
The scheme is touted as to become the world’s biggest pension scheme for the unorganised sector in five years. The scheme is designed as a tribute to the workers in the unorganised sector who contribute around 50 per cent of the country’s Gross Domestic Product (GDP).
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 It has decided to exempt income tax that is applicable on part of NPS corpus that is withdrawn on retirement. At present, while exiting scheme, 60% of corpus could be withdrawn and 20% of withdrawn amount is taxable.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.