New Pension Scheme: Budget proposes employee-friendly tweaks

New Delhi: In a significant move aimed at enhancing social security benefits, the Central Government has introduced key provisions in Budget 2024-25, with a major focus on the New Pension Scheme (NPS).

Finance Minister Nirmala Sitharaman announced on Tuesday a series of measures designed to improve social security benefits. Among these, she proposed increasing the employer's contribution towards the NPS from 10% to 14% of the employee's salary.

Additionally, it is proposed that the deduction for this expenditure, up to 14% of salary, be allowed from the income of employees in the private sector, public sector banks, and public sector undertakings opting for the new tax regime.

Sitharaman stated that a solution will be developed concerning the NPS to address pertinent issues and ensure fiscal prudence.

Last year, the Finance Ministry established a committee under Finance Secretary T.V. Somanathan to review the pension scheme for government employees and recommend any necessary changes, considering the existing framework and structure of the National Pension System.

Several non-BJP-ruled states had decided to revert to the DA-linked Old Pension Scheme (OPS) and also employee organisations in some other states have raised demand for the same.
In her Budget speech in the Lok Sabha, Sitharaman said the Committee to review the NPS has made considerable progress in its work.

She said the staff side of the National Council of the Joint Consultative Machinery for Central Government Employees have taken a constructive approach.

"A solution will be evolved which addresses the relevant issues while maintaining fiscal prudence to protect the common citizens," the minister said.
Under the OPS, retired government employees received 50 per cent of their last drawn salary as monthly pensions. The amount keeps increasing with the hike in the DA rates.

The Finance Minister also proposed to start 'NPS-Vatsalya', a plan for contribution by parents and guardians for minors.

On attaining the age of majority, the plan can be converted seamlessly into a normal NPS account. (with PTI inputs)