MOF approved contri. under Tier-II of NPS as deduction U/S 80C & entire withdrawal of corpus at the time of retirement tax free

On 10th December, the Ministry of Finance approved the following in National Pension Scheme (NPS):-

The Government has made NPS more attractive for investors, with the biggest bonanza going to about 18 lakh central government employees. The Centre will contribute 14% of basic salary to their pension corpus, up from 10%. The employee's contribution will remain at 10%, bringing the total contribution to 24%.

Contribution by Government employees under Tier-II of NPS will now be covered under Section 80 C for deduction up to Rs. 1.50 lakh for the purpose of Income Tax at par with other schemes such as GPF, CPF, Employees Provident Fund & PPF provided that there is a lock-in period of 3 years. 

At present, 40% of the total accumulated corpus utilised for purchase of annuity is tax exempt. Of the remaining 60% corpus withdrawn by the NPS subscriber at the time of retirement, 40% is tax exempt and 20% is taxable. The tax exemption is now extended to the entire 60%. With this, the entire withdrawal will now be exempt from income tax. 

The other decisions include: 

*Providing freedom of choice for selection of Pension Funds and pattern of investment to central government employees.                                *Payment of compensation for non-deposit or delayed deposit of NPS contributions during 2004-2012.