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New Pension Scheme for high income workers

Labour Ministry is considering pension scheme for high income EPFO members

Policy Pulse
Publish Date: Jul 11 2016 12:24PM | Updated Date: Jul 11 2016 12:24PM

New Pension Scheme for high income workers

As reported by Economic Times, the labour ministry is considering a pension scheme for high-income working group as the BJP-led NDA government gears up its drive to create a pensioned society.

 

A senior labour ministry official, who is part of the conceptualisation process, told ET that the initial idea is to roll out the scheme under the retirement fund body Employees Provident Fund Organisation so as to get exempt-exempt-exempt (EEE) status even for pension fund would also make the scheme more attractive than the National Pension System (NPS) that does not enjoy this kind of tax benefit. 

 

Under the EPF & MP Act, out of the employers' 12 per cent contribution to provident fund for its employees, 8.33 per cent goes to the Employee Pension Scheme. 

 

This would also make the scheme more attractive than the National Pension System (NPS) that does not enjoy this kind of tax benefit. 

 

Under the EPF & MP Act, out of the employers' 12 per cent contribution to provident fund for its employees, 8.33 per cent goes to the Employee Pension Scheme. 

 

While this contribution from employer is mandatory for workers earning up to Rs 15000, the employee does not have to contribute. The new scheme, if approved, will be available to the high earning EPFO members on a contributory basis. 

 

"We are thinking of coming up with an all-new pension scheme for higher income group of people who do not otherwise save in any pension fund and therefore are often devoid of any retirement benefits after the age of 60 years," the official said on condition of anonymity. 

 

It is not clear if the finance ministry will be open to the idea of another pension scheme. The government has been pushing the NPS to create a pensioned society. In the budget for this year, finance minister Arun Jaitley had made changes in tax treatment of EPF and other retirement savings scheme, reasoning tax rules should be the same for all pension plans. 

 

"I propose to make withdrawal up to 40 per cent of the corpus at the time of retirement tax exempt in the case of NPS," he had said while simultaneously proposing tax on withdrawal from PF, which was withdrawn after hue and cry from all sectors, leaving NPS still less attractive than the EPF where withdrawals are not taxable. 

 

According to the official who did not wish to be identified, the new scheme would have an edge over the existing scheme as deposits under the scheme may not attract any tax at any time.