Negosentro.com | A retiree solely plans his post retirement days on the basis of various pension plans available. These post retirement pension plans are for those senior people who have worked hard throughout their life in the hope of a secured life after retirement.
Will it be too much to expect a little more level playing field for the pension plans in India? Since the future of retirees completely depends upon these pension plans, it is time to revise the tax treatment on these pension schemes.
What Is to Be Done to Seek Level Playing Field for the Pension Plans?
In the budget plan of 2018, the Pension Fund Regulatory and Development Authority has pleaded to seek a level playing field for various pension plans with National Pension System of India. There are almost 12 million subscribers to the NPS. Thus, it is very much comprehensible to expect similar tax opportunity as other superannuation schemes.
It is absolutely important for these large number of NPS subscribers to enjoy similar benefits as other pension plans to build up enough corpus for their upcoming days. This is why PFRDA is struggling to seek complete exemption status i.e. EEE for the National Pension Scheme. PFRDA’s demands:
- Provision for tax free withdrawal of sum from National Pension System. At present scenario, the sum withdrawn from NPS and the corpus received at maturity are subjected to tax.
- Same tax treatment for National Pension System as Employee Provident Fund and Public Provident Fund. PFRDA is questioning against the disparity in the treatment of tax facilities of NPS from that of EPF or PPF. While both EPF and PPF enjoy Exempt tax class, NPS is still taxed on withdrawal and maturity, getting EE Taxed status.
What Else is Proposed in Support of Pension Plans in Budget 2018?
- Equal Opportunity to All Subscribers – Besides, similar status of NPS, the opportunity of tax free withdrawal is also demanded for the non-employee subscribers of NPS. This proposal has been put forward by the minister of finance in the current Budget in support of pension plans. It is further insisted that similar benefits should be provided to all the subscribers – both employee and non-employee.
- Equal Tax Benefit to the NPS Subscribers – At present time, the employee subscribers of NPS can avail 40 percent withdrawal of the entire maturity sum amount without paying any tax to the government. But this facility is only available to the employee subscribers. Even this exempt benefit cannot be availed by the non-employee subscribers of National Pension System. NPS being one of the important pension plans for both employee and non-employee subscribers, it should provide equal tax treatment facility to all its subscribers.
- Tax Exempt Benefit for Pension Plans – The superannuation protection offered by the Indian Government is not enough. Thus, government should take necessary steps to thrust more people to make long period investments in Life insurance products by allowing a greater income tax exempt limit apart from liquid and short investment products. A further exemption of ₹50 thousand on the insurance products per year will motivate more number of superannuated people to invest in long-term investments in order to secure their pension plans.
- Similar Advantages for All Pension Plans – Moreover, receiving equal tax benefit has remained one of the foremost pleads among the insurance industries. It has been proposed that the life insurance investment pension plans are also be allowed availing similar advantages as National Pension System in order to provide prospect to every household in India to build up wealth for their superannuation period. Life Insurance companies, thus, also wants tax exempt on annuities or pension plans and provision to avail tax free withdrawals.
- GST Exempt on Life Insurance Products – the exemption of GST has been proposed for the true life insurance instruments.
- Other Government Aided Plans with Tax Emption Feature – Government of India has introduced multiple numbers of plans with exemption benefit such as Pradhan Mantri Jeevan Jyoti Bima Yojna, Atal Pension Yojna, and Pradhan Mantri Suraksha Bima Yojna.
Government Aided Pension Plan – Atal Pension Yojana – It is a step taken by the government to provide a pension solution to people from every strata of society. At first place these pension plans did not give any tax benefit to its subscribers but now, ATY provides similar tax treatment as National Pension System. This suggests that the amount paid as premium to this superannuation plan is eligible to avail tax deduction permitted by Sec. 80CCD of Indian Income Tax Act. The maximum limit of exemption of income tax is ₹50 thousand within Atal Pension Yojana. Moreover in this annuity scheme, the investor needs to choose their pension on monthly basis starting from the amount of ₹1 thousand. The investors are also offered to change the pension sum during the premium paying term.
