News: Private sector contributions to NPS may be taxed for past 5 years

Strategic HR

Private sector contributions to NPS may be taxed for past 5 years

Multinational corporations such as Vodafone may not be the only entities ensnared by retrospective taxation. Contributions by private sector subscribers to the National Pension System (NPS) over the past five years may have become taxable in certain situations, because of a provision in the budget intended to correct an anomaly between government and private employees. The NPS was initially meant to build up a post-retirement corpus for government employees joining service on or after January 1, 2004, with employer and employee contributions to the scheme being tax free since that date. However, the wording of Section 80CCD of the Income-Tax Act, which grants this tax break, was not changed when private sector firms were allowed to enroll employees into the scheme from May 1, 2009 - thus restricting the tax break to government employees who joined service after 2004.

Multinational corporations such as Vodafone may not be the only entities ensnared by retrospective taxation. Contributions by private sector subscribers to the National Pension System (NPS) over the past five years may have become taxable in certain situations, because of a provision in the budget intended to correct an anomaly between government and private employees. The NPS was initially meant to build up a post-retirement corpus for government employees joining service on or after January 1, 2004, with employer and employee contributions to the scheme being tax free since that date. However, the wording of Section 80CCD of the Income-Tax Act, which grants this tax break, was not changed when private sector firms were allowed to enroll employees into the scheme from May 1, 2009 - thus restricting the tax break to government employees who joined service after 2004.

Read the Economic Times news report here.

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Topics: Strategic HR, #Current, #National

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