Government will rationalise the pension sector by a uniform tax treatment and has proposed to raise the exemption limit from Rs 1 lakh to Rs 1.5 lakh for annual contribution in a superannuation fund and also non-levy on taxes upon the death of an employee under NPS.
Besides, 40 per cent of the pension wealth under NPS will be exempted from tax.
It is proposed to provide a uniform tax treatment to the recognised provident fund, national pension system and superannuation fund, Finance Minister Arun Jaitley said while presenting Union Budget 2016-17 in Lok Sabha today.
“Exemption limit is proposed to be increased from Rs 1 lakh to Rs 1.5 lakh for annual contribution by an employer to a superannuation fund.
“Any amount received by the nominee, on the death of the employee at the time of closure of account under National Pension System referred to in section 80CCD of the Income-tax Act is proposed to be exempt”, Jaitley said.
Among others, a monetary limit of Rs 1.5 lakh will be provided for annual contribution in a provident fund and exemption for one-time portability from provident fund or superannuation fund to National Pension System (NPS).
The finance minister also proposed that 40 per cent of the pension wealth of an employee under NPS will be exempted from tax.
“It is also proposed the exemption under the recognised provident fund and superannuation fund will be limited to 40 per cent of the accumulated amount arising out of contributions made in such funds on or after April 1, 2016.
“However, this restriction shall not be applicable to an employee participating in a recognised provident fund and whose monthly salary does not exceed Rs 15,000 per month,” he said.
Besides, to help India moved towards greater pension coverage, the government has also done away with the levy of service tax on annuity under the NPS run by Pension Fund Regulatory and Development Authority of India.