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Time of India
3 hours ago
- Time of India
NPS vs UPS: Big move for central government employees! NPS tax benefits now available under UPS - here's what it means
In a significant move aimed at strengthening the Unified Pension Scheme (UPS), the Finance Ministry has extended income tax benefits currently available under the National Pension System (NPS) to the newly introduced UPS. A government release said, 'In a bid to provide further impetus to the UPS, the Government has decided that tax benefits as available under NPS shall apply mutatis mutandis to UPS as it is an option under NPS. These provisions ensure parity with the existing NPS structure and provide substantial tax relief and incentives to employees opting for the Unified Pension Scheme.' The government's decision is expected to address the primary concern that had dampened interest in the UPS — lack of clarity on tax treatment. UPS, which became operational on April 1, 2025, is a guaranteed pension model for central government employees that operates within the broader NPS framework. Tax benefits under NPS: Old vs New regimes Under the old tax regime, central government employees enjoy deductions under three provisions: Section 80CCD(1): For employee's own contribution, capped at 10% of basic salary or Rs 1.5 lakh (whichever is lower), within the broader Rs 1.5 lakh limit under Section 80C. Section 80CCD(1B): An additional deduction of Rs 50,000 for contributions to the NPS Tier-I account. Section 80CCD(2): For employer's contribution, up to 14% of basic pay + dearness allowance (DA) for central government employees. Under the new tax regime, deductions are restricted to Section 80CCD(2), where a government employee can claim up to 14% of basic pay + DA as deduction for employer's contribution. There is no deduction for the employee's contribution under this regime, according to an ET report. With the extension of the same framework to UPS, employees choosing the new scheme can expect equivalent tax savings. Key expert views on UPS tax deductions Naveen Wadhwa, Chartered Accountant and Vice President at told ET, that those choosing the old tax regime will continue to avail deductions under Section 80CCD(1) and Section 80CCD(1B). However, further clarification is required regarding the maximum deduction limit under Section 80CCD(2). The uncertainty stems from the fact that whilst Section 80CCD(2) permits a maximum deduction of 14% of basic salary plus DA under both tax regimes, the government's contribution towards UPS stands at 18.5%, which exceeds the NPS contribution rate, he said. Ashish Niraj, Chartered Accountant and Partner at A S N & Company, noted: 'One of the main reasons for the low choice of UPS was the uncertainty regarding the taxation of UPS. Now that the government has clarified that tax benefits will apply mutatis mutandis, people will get clarity. Earlier, NPS subscribers were eligible for tax deduction up to 14% of salary (Basic + DA) contributed by the employer under Section 80CCD(2) under both the tax regimes over the limit of Rs 1.50 lakh provided under Section 80C and Rs 50,000 under Section 80CCD(1B). Now, as the government contribution is 18.5% in the case of UPS, so in my view, UPS subscribers will get 18.5% deduction under 80CCD(2) if they are government employees.' Contribution structure and assured benefits under UPS As per the government's FAQs, both the employee and the Central Government will contribute 10% each of basic pay plus DA to the individual corpus. Additionally, the government will contribute another 8.5% to a pooled fund, intended to support the guaranteed pension benefits for UPS subscribers. UPS guarantees a monthly pension payout equal to 50% of the average of the last 12 months' basic pay, provided the employee has completed 25 years of qualifying service. Those with at least 10 years of service are entitled to a minimum assured payout of Rs 10,000 per month, subject to regular and timely contributions. Deadline extended for opting in The Finance Ministry has also extended the deadline for central government employees to switch from NPS to UPS from June 30, 2025, to September 30, 2025. This extension offers employees more time to assess the viability of the new scheme in light of the clarified tax treatment. This policy alignment is likely to increase traction for the UPS, especially with the potential for full tax deduction on the 18.5% employer contribution — a feature that could tilt the decision in favour of those seeking assured post-retirement benefits. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
News18
6 hours ago
- News18
How EPF And NPS Together Can Secure Rs 12 Cr Retirement Corpus Without Tax Burden
As per an illustrative scenario shared by Bangar, an individual earning Rs 75,000 per month and contributing Rs 12,500 each to EPF and NPS (including employer share), while increasing contributions by 8% annually, can accumulate a combined corpus of Rs 12.16 crore in 30 years. This is based on current return assumptions — 8.25% for EPF and 11% for NPS. While EPF offers guaranteed returns and tax-free maturity, it has limited liquidity and may not suit short-term goals. On the other hand, NPS offers higher returns through market-linked options and ultra-low management charges (0.1%), but mandates that 40% of the corpus be used to buy an annuity at retirement, which restricts full withdrawal. Further, Bangar pointed out that individuals with a salary of up to Rs 14.65 lakh annually can remain tax-free even under the new income tax regime, if their employer contributions to EPF and NPS are optimized. Contributions of up to 12% of basic salary to EPF and up to 14% to NPS are exempt from tax. To maximize returns, experts suggest choosing VPF for extra EPF savings, using NPS Active Choice with higher equity allocation early on, and gradually shifting to debt as retirement nears. Additionally, adopting Systematic Lump Sum Withdrawals (SLW) from NPS post-retirement can help reduce tax burden.
Mint
6 hours ago
- Mint
ITR filing FY 2024-25: Don't miss THESE 10 must-know tax deductions under 80C, 80D and more
With the September 15, 2025 tax filing deadline approaching slowly but surely, many taxpayers in the country are looking to cut liabilities under the old regime. To ensure that this goal is achieved, efficient planning is essential. Do keep in mind that key documents such as Form 16, Annual Information Statement (AIS), and Taxpayer Information Statement (TIS) simplify this entire process by capturing income and Tax Deducted at Source (TDS) details. Furthermore, to facilitate the same process and help in boosting savings of taxpayers, the Income Tax Act provides several deductions for both salaried and self employed individuals. Here are ten commonly claimed sections to help you file smarter and save more. This particular section permits deductions of up to ₹ 1.5 lakhs on an annual basis. Eligibility investments include Employee Provident Fund (EPF), Public Provident Fund (PPF), life insurance premiums, Equity Linked Savings Schemes (ELSS), five year tax saving fixed deposits along with National Savings Certificates (NSC). Under this section, contributions which are made to pension plans provided by insurance companies qualify for deductions. It formulates part of the overall ₹ 1.5 lakh limit under Section 80C. Due to the same it provides another avenue that tax payers can explore and utilise to maximise their tax savings. This section provides cover to individual contributions that are made to the National Pension System (NPS). Both salaried and self employed individuals can claim deductions within the combined 80C ceiling. To ensure maximum benefits from this section it will be prudent for tax payers to discuss their savings strategy with a certified financial advisor. Taxpayers can go on and claim an additional ₹ 50,000 exclusively for NPS contributions under this particular section. Do remember, this claim will be over and above the Section 80C cap. This helps in ensuring that NPS remains one of the few tax saving instruments which is available under both the old and new regimes, providing long term retirement benefits along with immediate advantages in tax for contributors. Under this particular provision, deductions for health insurance premiums are available up to ₹ 25,000 for self and family, not only this, there is a provision of ₹ 50,000 for senior citizen parents as well. Prevention health scans and checkup are permitted within this limit, up to ₹ 5,000. The expenses on the care of a dependent with a disability qualifies for deduction under this legal provision. ₹ 75,000 is the limit for regular disabilities along with ₹ 1.25 lakhs for severe and serious conditions. The interest paid on education loans for higher studies can be requested for and claimed as a deduction under this section. This benefit can be claimed for up to eight consecutive years, with no upper limit on the total amount. Hence, the efficient and planned use of this section can help aspiring students to propel their educational journey and transform themselves into successful professionals. First time home buyers can avail the benefit of this section by claiming a deduction of up to ₹ 50,000 annually on interest paid for a particular home loan. This is subject to conditions on loan size and the value of the property. The interest payments on housing loans for self occupied properties are deductible for up to ₹ 2 lakhs annually. Furthermore, for let out or rented properties the entire interest amount may be claimed. This section goes a long way to helping save interest payments on housing loans. This section permits tax deductions on donations made to approved charitable institutions, with eligible deductions being either 50% or 100% of the contributions based on the approval provided by the organisation. For all personal finance updates, visit here. Disclaimer: This article is for informational purposes only and does not constitute tax or financial advice. Readers are advised to consult a qualified tax professional for personalised guidance.
