The Pension Fund Regulatory and Development Authority (PFRDA) has urged for an increase in tax exemptions on employer contributions to employees' pensions, aiming to align it with provident fund norms. Currently, the employer's contribution to the provident fund is deductible up to 12% of the salary (basic + dearness allowance), capped at Rs7.5 lakh, with tax exemption on the interest earned.

 

In contrast, the employer's contribution to the National Pension System (NPS) is only exempt up to 10% of the salary (basic + dearness allowance). Deepak Mohanty, Chairman of PFRDA, emphasized the need to raise this exemption to 12% to match the Employees' Provident Fund Organization (EPFO). The ultimate goal is to make it 14%, aligning with the tax-free contribution limit for government employees.

 

Mohanty, during a Mumbai visit to engage with distributors and stakeholders, noted the superior performance of the NPS. Equity funds within NPS delivered impressive returns of 24.2% over one year, 18.4% over three years, and 13.3% since inception. The government scheme, a mix of debt and a small equity portion, has yielded a return of 9.46% since inception.

 

Despite this commendable performance, the NPS faces challenges in subscriber growth, particularly in the private sector. As of December 2023, the private sector's subscriber base stands at 51 lakh, managing assets under management (AUM) slightly exceeding Rs2 lakh crore. Mohanty shared PFRDA's ambition to attract 13 lakh new subscribers during the current fiscal year. While progress has been made with the addition of around 5.3 lakh subscribers, the focus remains on expanding awareness through campaigns, distributor engagement, and social media.

 

In a recent development, PFRDA has introduced more convenience for NPS contributors by allowing deposits through the Unified Payments Interface (UPI) QR code under the D-Remit process. Notably, the D-Remit virtual account is distinct from the Permanent Retirement Account Number (PRAN), with unique virtual account numbers and QR codes for Tier I and Tier II NPS accounts. This move aligns with PFRDA's commitment to enhance accessibility and ease of transactions for NPS contributors.