PFRDA seeks tax breaks for employers’ NPS flows

MUMBAI: The pensions regulator has requested increased tax breaks on employer contributions to employees’ pensions, aiming to align it with the tax treatment of employer contributions to the provident fund.
Currently, the employer’s provident fund contribution, for the employee’s benefit, is deductible up to 12% of the salary (basic + DA), capped at Rs 7.5 lakh, and the interest on this contribution is tax-exempt.However, under the National Pension Scheme, the employer’s contribution towards NPS is only exempt up to 10% of the salary (basic + DA).
“We have requested to increase it to 12% to align it with EPFO. Our goal is to make it 14% because, in the case of government employees, contributions up to 14% are tax-free,” said Deepak Mohanty, chairman of PFRDA.
Mohanty was in Mumbai to meet with distributors and other stakeholders in the NPS to expand the subscriber base. He also announced that the corpus under the NPS has crossed Rs 11 lakh crore.

He mentioned that the NPS has outperformed all equity benchmarks, with equity funds generating returns of 24.2% over one year, 18.4% over three years, and 13.3% since inception. The central government scheme, a mix of debt and a small equity portion, has yielded 9.46% since inception.
Despite the scheme’s performance and the ease of investing, awareness regarding it and the flexibility it provides through systematic withdrawals remains low. In the private sector, the total subscriber base is only 51 lakh, with assets under management of a little over Rs 2 lakh crore as of December 23.
“We aimed to attract 13 lakh subscribers during the current financial year. We have added around 5.3 lakh subscribers so far and are focusing on expanding awareness through campaigns, distributors, and social media,” said Mohanty.