The Govt had launched New Pension Scheme on May 1st 2009 after discussing it with PFRDA (Pension Fund Regulatory Development Authority). New Pension Scheme got very good response from the people both young and old. The govt has announced many regulatory changes in the New Pension Scheme then. The Union Budget has added more flavour to the New Pension Scheme and PFRDA.

Let us analyze the minute details and the changes in the New Pension Scheme after Union Budget 2009-10. In the Budget 2009-10 it was decided to allow the self-employed to become a member of New Pension Scheme. The self employed can now join this and also get a tax exemption of Rs 1 lakh /year.  The interesting thing to notice is that the returns that you earn from the New Pension Scheme is now tax free. The NPS scheme will now be exempted from STT (securities transaction tax) and the so called dividend distribution tax. That means a person who invests Rs 1 lakh per year in NPS can get Rs 2-3 lakhs extra over a period of 30-35 years.

The only hindrance which now remains as a concern is that the when you withdraw the maturity amount will be taxed. This is unlike several other pension schemes like PPF (Public Provident Fund), EPF (Employee Provident Fund) or ULIPs (Unit linked Insurance Policies). The PFRDA Board is still negotiating with the Govt at the center to bring the NPS Scheme on par with PPF, EPF and the ULIPs.

NPS as we know is a voluntary scheme and does not enjoy some benefits like certain contribution from the Employer’s side like the EPF or PPF. But unlike the other pension schemes, NPS or the New Pension scheme enjoys a higher rate of return in long term as it is a mix of equity, debt and other govt bonds.

The govt may also think on the FDI cap it has on insurance and pension fund management. Now the govt allows only 26% FDI in these sectors. If the FDI in these sectors can move upto 49%, then a lot more changes can come in. The PFRDA board is planning to take more steps to make this scheme more popular by educating people about this. If you are looking for more information and to join PFRDA, you can check the link.

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