The Pension Fund Regulatory and Development Authority (PFRDA) has submitted to the Finance Ministry its budget wish list, emphasizing the need for tax breaks for NPS contributions, akin to the Section 80C deduction provided in the old tax regime. Such incentives, according to PFRDA, are crucial for boosting retirement savings and promoting a pensioned society in India.
The adoption of NPS in the private sector has seen rapid growth in recent years. However, changes in taxation during budget announcements have impacted the interest of new private sector subscribers in the product. The new tax system has eliminated tax breaks for contributions to NPS.
PFRDA’s Budget wish list also calls for tax breaks/deductions under the new tax regime for contributions made by employees toward their NPS accounts.
New NPS subscribers
PFRDA has also expressed optimism in reaching its annual target of adding 13 lakh new NPS subscribers from the private sector in the current fiscal year, despite the current count standing at only 6 lakh.
In the previous fiscal year, PFRDA successfully added a million new NPS subscribers from the private sector. Presently, there are 5.2 million NPS subscribers in the private sector, boasting assets under management (AUM) of Rs 2.09 lakh crore as of January 13.
The surge in private sector participation has been a key factor contributing to the robust growth in overall NPS assets, surpassing the Rs 11-lakh crore mark on January 10.
Points of presence
In a move to simplify the registration process and encourage more entities to participate in distributing NPS, PFRDA has relaxed its Points of Presence (PoP) Regulations 2023. Now, banks and non-banks can operate with just a single registration for NPS, removing the previous requirement for multiple registrations and a minimum of 15 branches across the country.
To expedite the registration process, the timelines for disposing of applications have been reduced to thirty days from the existing sixty days. PoPs are now mandated to indemnify subscribers for any losses due to fraud or negligence.
The eligibility criteria for PoPs, in terms of minimum net worth, have been strengthened and increased to Rs 2 crore, facilitating a more robust selection process. Additionally, the concept of PoP-Sub Entity (PoP-SE) has been subsumed under the agency model, streamlining the registration process for entities involved in distributing pension schemes.
