Budget 2015-16: Major boost for Pension Schemes & NPS...!

Budget 2015-16:  

Major boost for Pension Schemes 

& NPS...!

The additional tax incentives for investments in pension funds & the NPS are intended to push up retiral savings in the long term.

in a bid to create a “pensioned society“, Finance Minister Mr. Arun Jaitley has introduced various tax incentives as well as a new pension scheme, in Budget 2015. These are not only aimed at boosting retiral savings, but also giving a push to the government's low-profile National Pension Scheme (NPS).

The investible limits for pension products have been raised under Section 80CCC and 80CCD.

Under Section 80CCC, the deduction limit has been increased from Rs. 1 lakh to Rs. 1.5 lakh for contribution to pension funds of the LIC or Irda-approved insurers. The deduction limit under Section 80CCD has been raised from Rs. 1 lakh to Rs.1.5 lakh for contribution by an employee to the NPS.

However, since the pension products from mutual funds fall under Section 80C, its limit is already Rs. 1.5 lakh.

To give an additional boost to the NPS, the finance minister has created a separate window of Rs. 50,000 under Section 80CCD (1B). “Since this section doesn't fall under the overall cap of Rs. 1.5 lakh under Section 80CCE, the deduction of Rs. 50,000 for the NPS will be over and above the normal limit of Rs. 1.5 lakh,“ says Mr. Vikram Shroff, Head, HR Law, Nishith Desai Associates.

However, insurance and mutual fund players are disappointed with this special treatment for the NPS. “The life insurance sector has been completely ignored in the Budget. We expected a separate limit of Rs. 50,000 for pension plans, but the rise has been restricted to the NPS,“ says Mr. Manoj Jain, CEO, Shriram Life Insurance. A Balasubramanian, CEO, Birla Sunlife is hopeful that this will be corrected and other pension products also will be added later.

Another critical move is that employees can now choose between the Employee Provident Fund (EPF) and NPS.

“This is a master stroke by the finance minister and is very good for investors who want to shift a part of their retirement savings to equities,“ says Mr. Tanwir Alam, Founder & CEO of Fincart.

This is because as of now, their contribution compulsorily goes to structured debt investments. The EPFO trustees are also resisting government's efforts to shift a part of the EPF corpus to equities.With this new measure, the investors have been given the option to decide the asset allocation themselves.

Will this make the NPS more attractive?

While it is expected to get a boost because of the additional deduction of `50,000, the basic reason investors are vary about it is the compulsory provision of buying annuity.

Src: ET

Share: