National Pension Scheme: Government weighs extension of NPS benefits to new tax regime in Budget 2024

In a potential game-changing move, the government is reportedly considering extending the benefits of the National Pension System (NPS) to the new tax regime, CNBC Awaaz reported citing insider sources. Currently, tax exemptions on NPS investments are exclusive to the old tax system, however, there are indications of an official announcement to include NPS benefits in the new tax structure during the forthcoming interim budget, 2024.

To enhance the attractiveness of the new tax system, the government is weighing the possibility of allowing exemptions on NPS investments, mirroring the existing provisions in the old tax regime. The Pension Fund Regulatory and Development Authority (PFRDA) has reportedly proposed this amendment to the government to make the new income tax system more appealing to taxpayers.

Under the current tax structure, individuals enjoy tax exemptions up to ₹1.5 lakh under Section 80C, with an additional ₹50,000 available under Section 80CCC(1B) for NPS contributions. The proposed changes could see similar exemptions offered in the new tax system, aimed at encouraging wider participation.