Budget Announcements Related to Pension Reforms

Budget Speech 2016-17


Para 85. (i) Foreign investment will be allowed in the insurance and pension sectors in the automatic route up to 49% subject to the extant guidelines on Indian management and control to be verified by the Regulators.

Para 137. Pension schemes offer financial protection to senior citizens. I believe that the tax treatment should be uniform for defined benefit and defined contribution pension plans. I propose to make withdrawal up to 40% of the corpus at the time of retirement tax exempt in the case of National Pension Scheme.

Para 138. In case of superannuation funds and recognized provident funds, including EPF, the same norm of 40% of corpus to be tax free will apply in respect of corpus created out of contributions made after 1.4.2016.

Para 139. Further, the annuity fund which goes to the legal heir after the death of pensioner will not be taxable in all three cases. Also, we are proposing a monetary limit for contribution of employer in recognized Provident and Superannuation Fund of Rs.1.5 lakh per annum for taking tax benefit.

Para 140. I propose to exempt from service tax the Annuity services provided by the National Pension System (NPS) and Services provided by EPFO to employees.

Annexure to Part B of Budget Speech

Para 2 (2.1). It is proposed to provide a uniform tax treatment to the recognised provident fund, national pension system and superannuation fund. Accordingly, the following are proposed:-

 Any amount received by the nominee, on the death of the employee at the time of closure of account under National Pension System referred to in section 80CCD of the Income-tax Act is proposed to be exempt.

 Exemption is proposed to be provided for one-time portability from a recognised provident fund or superannuation fund to National Pension System.

 It is proposed that 40% of the pension wealth received by an employee from the National Pension System Trust shall be exempt.