Budget Announcements Related to Pension Reforms

Budget Speech 2015-16

Para 7.7 It is proposed to increase the limit of deduction u/s 80CCD of the Income tax Act on account of contribution by the employee to National Pension Scheme (NPS) from Rs. 1 lakh to Rs. 1.50 lakh. It is also proposed to provide a deduction of upto Rs. 50,000 over and above the limit of Rs. 1.50 lakh in respect of contributions made to NPS.

Para 39. A large proportion of India’s population is without insurance of any kind - health, accidental or life. Worryingly, as our young population ages, it is also going to be pension-less. Encouraged by the success of the Pradhan Mantri Jan Dhan Yojana, I propose to work towards creating a universal social security system for all Indians, specially the poor and the under-privileged. 40. The soon-to-be-launched Pradhan Mantri Suraksha Bima Yojna will cover accidental death risk of `2 lakh for a premium of just `12 per year. Similarly, we will also launch the Atal Pension Yojana, which will provide a defined pension, depending on the contribution, and its period. To encourage people to join this scheme, the Government will contribute 50% of the beneficiaries’ premium limited to `1,000 each year, for five years, in the new accounts opened before 31st December, 2015.S

Para 62. With respect to the Employees Provident Fund (EPF), the employee needs to be provided two options. Firstly, the employee may opt for EPF or the New Pension Scheme (NPS). Secondly, for employees below a certain threshold of monthly income, contribution to EPF should be optional, without affecting or reducing the employer’s contribution. With respect to ESI, the employee should have the option of choosing either ESI or a Health Insurance product, recognized by the Insurance Regulatory Development Authority (IRDA). We intend to bring amending legislation in this regard, after stakeholder consultation.

Para 125. Madam Speaker, the fifth pillar of my taxation proposals this year is extension of benefits to middle class tax payers. The proposals in this regard are as follows :

• The limit on deduction on account of contribution to a Pension Fund and the New Pension Scheme is proposed to be increased from Rs. 1 lakh to Rs. 1.5 lakh.

• 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. This will enable India to become a pensioned society instead of a pension less society.