In a major reform for pensioners and salaried individuals, the Government Extends NPS Tax Benefits to Unified Pension Scheme .The decision aims to make the Unified Pension Scheme more attractive for central government employees, providing parity between the two pension options.
Let’s break down what this means, who benefits, and how you can take advantage of the revised policy.
What Is the Unified Pension Scheme (UPS)?
The Unified Pension Scheme is an initiative to consolidate multiple small pension schemes into one robust and uniform pension framework. With this update, the scheme now also enjoys the same tax benefits as NPS, making it more attractive for contributors.
Introduced earlier this year, the UPS is available to new recruits joining the central government civil services from April 1, 2025. Existing government employees covered under the NPS have also been given a one-time option to switch to the new scheme.
In March, the Pension Fund Regulatory and Development Authority (PFRDA) notified the rules and procedures to operationalise the scheme. With the Finance Ministry’s latest decision, employees choosing UPS will now be entitled to the same tax deductions on contributions and other tax-saving incentives as those opting for the NPS.
The UPS has been designed to offer a more predictable retirement income by assuring a defined pension. Under the scheme, the government contributes 18.5 per cent of an employee’s basic pay and dearness allowance, while the employee contributes 10 per cent.
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💸 Key Highlights of the NPS Tax Benefit Extension
| Feature | Description |
|---|---|
| Tax Deduction (80CCD(1)) | Up to ₹1.5 lakh under Section 80C |
| Additional Deduction (80CCD(1B)) | Extra ₹50,000 for NPS or UPS |
| Employer Contribution (80CCD(2)) | Up to 10% of salary (basic + DA), deductible from taxable income |
| Portable Account | Like NPS, UPS accounts will also be portable across jobs |
| Secure Retirement | Government-backed retirement income after 60 |
This brings the UPS at par with NPS in terms of tax incentives, making it a viable alternative for both private sector and unorganised sector employees.
Why This Matters
- Encourages long-term retirement planning
- Increases participation from informal sector workers
- Helps standardize pension policies under a single umbrella
- Offers better tax savings for contributors
How to Enroll in the Unified Pension Scheme?
- Visit the official NPS/UPS registration portal through your employer or authorized aggregators.
- Provide KYC documents and complete e-verification.
- Start contributing monthly or annually as per your choice.
- Track your pension growth online.
Frequently Asked Questions (FAQs)
- Is the Unified Pension Scheme the same as NPS?
No, but it is aligned with NPS in terms of structure and now also tax benefits. - Can private employees join the UPS?
Yes, the scheme is open to private, informal, and self-employed sectors. - What is the tax saving limit under UPS?
You can claim up to ₹2 lakh annually—₹1.5 lakh under Section 80C and ₹50,000 under Section 80CCD(1B). - Is my money safe in the UPS?
Yes, like NPS, it is regulated by PFRDA and offers secure returns over time. - Can I switch from NPS to UPS or vice versa?
Specific migration policies are still under review. It is best to contact your pension service provider.
📢 Conclusion
With the government’s move to extend NPS-like tax benefits to the Unified Pension Scheme, salaried individuals now have another powerful tool for retirement savings with significant tax advantages. If you haven’t yet planned your pension, now is the time to act. Check Official NPS Website.