Countdown begins for govt employees to pick between NPS and UPS as deadline nears

New Delhi, Sep 27 (IANS) The countdown has begun for central government employees to choose between the existing National Pension System (NPS) and the Unified Pension Scheme (UPS), which came into effect on April 1 this year.

The June 30 deadline for UPS opt-out was later moved to September 30. Nearly 23 lakh central government workers are covered by the 2004-introduced NPS and can transfer to UPS, which was announced in August 2024 in response to persistent calls for a return to guaranteed pensions.

On September 2, the government gave its employees-- who chose UPS before September 30-- the option to switch back to NPS at a later date. However, you can only do this once and won't be able to return to UPS.

Three months before voluntary retirement or at least a year before superannuation, the decision must be made.

The Pension Fund Regulatory and Development Authority (PFRDA) allowed physical form submissions in case of technical difficulties because many employees were in a rush to submit their applications. Although the September 30 deadline is still in effect, employees who are deployed overseas or serving overseas may also turn in hard copies of their forms through their parent companies.

Employees who chose NPS and began their government service between April 1 and August 31, 2025, are also eligible to transfer to UPS. They have to turn in their selection by September 30.

The government has made UPS's taxation rules clearer. Sections 80CCD(2) and 80CCD(1) of the Income Tax Act will allow deductions for contributions made by the Centre and employees, respectively. Within certain bounds, retirement lump sum payments and partial withdrawals of up to 25 per cent will be tax-exempt. However, pension income will be subject to taxation under the "salaries" heading.

Tax laws were changed in August to give UPS and NPS equal treatment. Section 10 was amended to permit tax-free lump-sum payments equal to 10 per cent of monthly emoluments for each six months of service and to exempt up to 60 per cent of the individual's corpus at retirement.

With the September 30 deadline approaching, employees must make a final call on whether to remain with NPS or move to UPS.

--IANS

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