New Delhi. In Budget 2022, along with giving tax exemption on FDs with a lock-in period of three years, the central government can also give big relief to NPS subscribers.
Like EPF and PPF in the budget, the amount received by NPS subscribers on maturity can be taken out of the tax exemption. Also, they can be given the freedom to spend these money according to their own accord.
Investment Advisor Balwant Jain says that in this budget, the emphasis should be on removing some anomalies and disparities in the tax provisions related to the National Pension System (NPS). This will make NPS fair and better for all. Subscribers will also get full rights on their hard earned money.
40 percent has to be spent on annuity
Schemes like NPS and Employees’ Provident Fund (EPF) are for the salaried. Under the Public Provident Fund, people create a retirement fund. The amount received on maturity of EPF and PPF is tax free. NPS subscribers have to invest 40 per cent of the maturity amount towards buying an annuity from the life insurance company. Only 60 percent of the money comes in their hands, on which no tax is levied.
Tax exemption like EPF and PPF
Balwant Jain says that it is unfair to force only NPS subscribers to buy annuity, while EPF and PPF subscribers have the freedom to spend their money as per their choice. In such a situation, the government should reform the tax on the income received on maturity of NPS like all three schemes i.e. EPF and PPF. Earlier there was a lot of opposition to the government’s attempt to tax the share of maturity income under EPF. It was finally withdrawn in the 2016 budget. Now the way to make the taxation of all the three schemes uniform is to make the maturity amount of NPS completely out of the tax net.
Freedom to use funds
In fact, with the growth of Mutual Funds as an industry, strict regulations and monitoring by market regulator SEBI, mutual fund investments have become relatively safe. The government should give complete freedom to the NPS subscribers to invest the maturity amount in the products of their choice. It also includes restrictions on complete withdrawal of funds to ensure that the entire fund is not at risk. This should be applicable to EPF subscribers also.
Everyone gets 80C benefit on Tier-2 accounts
Investment advisor Sweety Manoj Jain explains that as per the existing provisions of section 80C of the Income Tax Act, central government employees can avail tax exemption under 80C for contributions to their Tier-2 NPS account with a lock-in period of three years. eligible to claim. Why this benefit is given only to central government employees, not all taxpayers. All NPS subscribers should be allowed tax benefit for contributions made to the NPS Tier-2 account. Especially when a Tier-2 account gives you a product with a lower risk than ELSS as compared to other products of the same tenure.
Get equal tax benefit on contribution
Central Government employees are eligible for tax deduction under section 80CCD(2) in respect of employer’s contribution of up to 14 per cent of the eligible salary, while for other categories of employees it is limited to 10 per cent of the salary. There is no point in giving such undue benefits to central government employees. It should be made the same for all employees. The limit should also be increased to 14 per cent for other employees in terms of employer’s contribution.
