Regulator seeks pension-linked tax break for self-employed
The Pension Fund Regulatory and Development Authority has proposed that the government extend to self-employed tax-payers the benefit of Section 80CCD that allows deduction of contribution up to Rs 1 lakh in retirement schemes.business Updated: Jun 19, 2009 20:52 IST
In a move that will make the New Pension System (NPS) more attractive to its subscribers, the Pension Fund Regulatory and Development Authority has proposed that the government extend to self-employed tax-payers the benefit of Section 80CCD that allows deduction of contribution up to Rs 1 lakh in retirement schemes.
The regulator also wants the government to give an equitable treatment to the NPS by offering it EEE status (tax exemption at all the three stages of contribution, accumulation and withdrawal) for tax treatment that is available to the Public Provident Fund.
While PFRDA is hopeful of getting the section 80CCD benefit for all its subscribers, it is unlikely that the EEE status will be offered to the investments in NPS as the government is thinking in the direction of withdrawing the EEE regime of tax treatment on all instruments.
“Instead of providing the EEE status to NPS, the general direction is to turn all instruments into EET,” said a senior government official on the condition of anonymity.
As of now the benefits of section 80CCD are available only to contributions of individuals employed either by the government or the organised private sector. It does not include self-employed individuals or workers in the unorganised sector.
Even though NPS is included in section 80CCD, the contribution from individuals in the unorganised sector or those who are self-employed would not qualify for deductions for tax benefit under the income tax law.
“NPS is meant for the common man and I am hopeful that the government will extend this to the unorganised sector and the benefits of section 80CCD will be offered irrespective of the nature of employment.” said D Swarup, chairman PFRDA. “I think it is discriminatory to segregate tax benefits on the basis of employment and so I have made a request which is logical for the government to extend it to everyone.”