Govt gives unified pension scheme tax parity with NPS

The revised Income Tax Bill 2025 passed by the Lok Sabha incorporates the tax relief for UPS

- Gireesh Chandra Prasad

The Centre's ambition to replace the over six-decade-old income tax law with a simplified legislation reached a step closer to reality, with the Lok Sabha on Monday approving a revised version of the bill.

The revised Income Tax Bill 2025 incorporates the tax relief offered to Unified Pension Scheme (UPS) subscribers under the Taxation Laws Amendment Bill 2025, which was also tabled in Lok Sabha on Monday.

These tax benefits are already available to National Pension System (NPS) subscribers. UPS is an alternative to NPS that retains employee contribution and guarantees central government staff a pension equivalent to 50% of the average basic pay of the last 12 months after more than 25 years of service.

The tax benefits include exemption on 60% lump-sum withdrawal at retirement.

The revised income tax bill includes most of the recommendations of the select committee of the Lok Sabha to avoid ambiguity in the simplification exercise and seeks to address concerns expressed by the industry and professionals during the consultation period.