The Finance Ministry has clarified that the tax benefits available under the National Pension System (NPS) will also apply to the Unified Pension Scheme (UPS). However, necessary rules will be changed for this so that they can be properly implemented in the context of UPS.

“In a bid to provide further impetus to the UPS, the Government has decided that tax benefits as available under NPS shall apply mutatis mutandis to UPS as it is an option under NPS,” the Finance Ministry said on July 4.

This means that the tax benefits that central government employees get under NPS will also be available in UPS. However, some necessary amendments will be made in the tax rules considering the different nature of UPS.

In simple words, the tax benefits that are available in NPS will be applied in the same spirit in UPS as well with just a few technical changes. But the basic spirit of the benefit will remain the same.

Here “mutatis mutandis” is a Latin word, which means “making necessary alterations while not affecting the main point at issue”.

Also read: NPS vs UPS: How much investment does a govt employee have to make to get Rs 1 lakh monthly pension?

“These provisions ensure parity with the existing NPS structure and provide substantial tax relief and incentives to employees opting for the Unified Pension Scheme,” the Finance Ministry further said.

“The inclusion of UPS under the tax framework marks another step forward in the Government’s effort to strengthen retirement security for Central Government employees through transparent, flexible and tax-efficient options,” also added in the ministry statement.

It is worth noting that the government has notified UPS as an alternative to NPS for new employees appointed to the Central Government civil services from April 1, 2025.

Employees who are currently covered under NPS have been given a one-time option to switch to UPS by September 30, 2025.

Along with this, the Pension Fund Regulatory and Development Authority (PFRDA) notified the rules related to UPS on March 19, 2025 — PFRDA (Operationalisation of the Unified Pension Scheme under NPS) Regulations, 2025.