In a boost to the pension sector, the government has proposed to raise the tax incentive limit for investment in pension funds by Rs 50,000. From now on, the limit on deduction on account of contribution to a pension fund and the New Pension Scheme (NPS) would increase from Rs 1 lakh to Rs 1.5 lakh.
Raising the limit will help taxpayers save more money, and also encourage people to park larger chunks in pension products.
“To provide social safety net and the facility of pension to individuals, an additional deduction of Rs 50,000 is proposed to be provided for contribution to the New Pension Scheme under Section 80CCD,” finance minister Arun Jaitley said.
The move is aimed at transforming India as a pensioned society instead of a pension-less society, the finance minister added. “Worringly, as our young population ages, it is also going to be pension less.”
Assets under management (AUM) under the NPS increased from Rs 48,136 crore as on 31, March 2014 to Rs 72,000 crore as on 31, December 2014, according to the Economic Survey 2014-15.
As on December 31, NPS had about 797.1 million members.
The NPS has found few takers and have not become popular as other competing products.
At present, there are eight pension fund managers, while only three — LIC Pension Fund, SBI Pension Funds Pvt Ltd and UTI Retirement Solutions Ltd — are allowed to manage the pension corpus of government employees.