To attract professionals and corporates to National Pension System, government should provide level-playing field to NPS in comparison to superannuation funds like EPF which enjoy EEE tax benefit, regulator PFRDA has said.
As on June 30, 2016, there were 12.9 million subscribers of NPS and Atal Pension Yojna with assets under management of Rs 1.32 lakh crore.
Central and state government employees account for 36.6 percent of the total subscribers and 88.6 percent of AUM under NPS and APY. Corporate segment account for only 3.8 percent of the subscriber and 8 percent of AUM.
The coverage under the corporate and all citizen model has not been an encouraging one, the Pension Fund Regulatory and Development Authority (PFRDA) said.
This is partly due to NPS not being fully extended the EEE tax treatment — exemption from tax of contribution, exemption of returns during accumulation and exemption of benefits on superannuation, it said in a concept paper.
“It is felt that as NPS competes with retirement products like EPF, CPF, superannuation funds, once a level-playing field is provided to NPS viz-a-viz other products, the response of the corporate sector and high income group self-employed individuals such as lawyers, doctors, accountants, would be much better than what it is now,” PFRDA said.
NPS is taxed at maturity.
Under NPS Lite/Swavalamban while there are fairly large numbers of subscribers registered, the average per head AUM is just Rs 5,000.
“It is a moot question whether their accumulated pension corpus would be large enough to get a pension of say Rs 1,000 per month even after being in the system for 20-25 years,” the note said.
NPS is a voluntary, defined contribution retirement savings scheme. It is regulated and administered by PFRDA.