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Employer Action Code: Monitor
Tax exemptions for new pension system proposed
The New Pension System (NPS) trust that was introduced in May 2009 might now be exempt from paying several taxes on income and transactions, according to the 2009-10 Budget. The proposal, which was presented to Parliament on July 6, 2009, would also enable the self-employed to participate in the NPS.
Key details
The main provisions of the proposal are the following:
- The NPS trust’s income will be exempt from income tax and Dividend Distribution Tax (DDT). Also, purchases and sales of equity shares and derivatives will be exempt from Securities Transaction Tax (STT).
- Self-employed workers will be now be eligible to enroll in the NPS, and avail themselves of these tax benefits.
Background
The NPS was extended to all citizens on May 1, 2009 by the Pension Fund Regulatory and Development Authority (PFRDA). However, the response to this system has not been favorable as it has only collected INR 8 million (USD 165,400) after two months of its launch.
July,
2009
The information included in this report is general information only and should not be relied upon without further review by the appropriate professional advisers. Watson Wyatt is not a law firm or an accounting firm and is not engaged in providing legal, accounting or tax services or advice.
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