New Pension Scheme (NPS)
A provision was made in the year 2003 that the Central Civil Services (Pension) Rules are not applicable to the government personnel/employees hired after December 31, 2003. On introduction of the NPS (National Pension Scheme) from January 1, 2004, the rules governing gratuity were changed.
Nevertheless, the advantage of death or retirement gratuity had been extended to the central government employees, shielded by New Pension Scheme on interim basis from May 5, 2009.
This was because of Central Government employees covered by NPS in cases where a government employee has retired on invalidation not attributable to government service, death in service not attributable to government duty; where government employee is discharged from service due to disease or injury attributable to duty and death in service. The Pension Fund and Regulatory and Development Authority have decided to expedite offering NPS through authentication of PAN card details and KYC verification from the bank for the bank accounts of active users. There was also a decrease in the amount of inflows on account of borrowing from abroad in the form of external profitable borrowings (ECBs) in the recent months. Indian companies have raised USD 16.2 billion from ECBs between April-November period of the current fiscal as against USD 20.2 billion in the same period of the last fiscal. Reserve Bank of India (RBI) has allotted a framework encompassing guidelines for issuance of rupee denominated bonds overseas.
The government is also thinking of introducing a tax-free new pension scheme for the high-income group, providing payouts for people who would otherwise not have received pension benefits upon retirement. According to an Economic Times report, the change is part of the government’s determination to build a pensioned society. A Government Official told the Newspaper that the Government is thinking of coming up with an all-new pension arrangement for people who belong to the higher income groups who, otherwise, do not save in any pension fund and consequently, are often bereft of any retirement welfare after the age of 60 years.
According to the report in the newspaper, which quoted a senior Labor Ministry Official, the new scheme will come under the Employees Provident Fund Organization and this will help it get the ‘exempt-exempt-exempt’ (EEE) status, which in turn means that all contributions, any revenue on those contributions, as well as withdrawals are exempt from tax deductions. That could make it possibly more attractive than the National Pension System, which doesn’t offer similar benefits.
There are projected 70 lakh high-income people who don’t automatically fall under pension benefits, and are presently permitted to join the Employees’ Provident Scheme (EPF) on a voluntary basis. The EPF scheme allows a contribution that is 12 per cent of the basic income and a corresponding contribution by his/her employer.
While it is unclear as to how the scheme targets to define the high income earners. Under the current tax rules, people earning over INR 10 lakh per annum are considered as high earners. India has an imperative need for more social security and retirement-related benefits. At present, retirement plans include the NPS, EPF, the Public Provident Fund (PPF) and private insurers’ provident products among others. Retirement benefits are mainly lacking in the informal sector, and for private initiatives, such benefits cover a lesser amount than eight per cent, according to a report. The major pension benefits at present go to the ones who are employed under the Central Government.