Budget 2024: As the Modi government gears up for the interim budget on February 1, 2024, all eyes are on potential changes to the National Pension System (NPS). Anticipations surround tax concessions, benefits for senior citizens, and adjustments to promote long-term savings. Here’s a closer look at the expected alterations.
Anticipated Tax Concessions for NPS Withdrawals
Expectations are high for an increase in the concessional tax rate on National Pension System (NPS) withdrawals. The focus is on aligning NPS contributions with the Employees’ Provident Fund Office (EPFO) and bridging the existing disparity.
Focus on Senior Citizens Above 75
The interim budget may bring relief for senior citizens aged 75 and above. Anticipated announcements include making the annuity portion of NPS tax-free, potentially eliminating the need for filing returns for NPS income.
Inclusion of NPS Benefits
Considerations are in place to include NPS benefits, such as interest and pension, making it easier for seniors above 75 who rely on NPS income. Currently, a tax-free withdrawal of 60 percent is in effect.
Extending Tax Benefits Under New Tax Regime
Persistent demands revolve around extending tax benefits to NPS contributions under the new tax regime. The current deduction limit of Rs 50,000 under Section 80CCD (1B) in the old tax regime is not applicable in the new one.
Government Employees and Pension System Review
A committee, led by Finance Secretary TV Somanathan, was formed last year to review the pension system for government employees. The awaited report is expected to suggest changes in the existing framework of the National Pension System (NPS) applicable to government employees.
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