The Modi government has made another major announcement for the benefit of central government employees.
Now, all the tax benefits available under the National Pension System (NPS) will also apply to the Unified Pension Scheme (UPS). This step is aimed at making UPS more appealing to central employees.
UPS is an Alternative to NPS
The Unified Pension Scheme (UPS) was introduced earlier this year for central employees, effective from April 1, 2025. It has been launched as an alternative to NPS.
Employees who are currently covered under NPS have also been given a one-time option to shift to UPS.
This means switching to UPS is not mandatory for those already enrolled in NPS.
What the Government Said
As per the Finance Ministry, employees who opt for UPS will now receive all the same tax benefits as those available under NPS.
This includes TDS and other tax-related exemptions, making UPS more financially attractive.
The move ensures both schemes offer equal tax benefits, providing a fair choice for employees who prefer UPS over NPS.
Features of the Unified Pension Scheme
The UPS offers a guaranteed pension. Under this scheme, the government contributes 18.5% of the employee’s basic salary plus dearness allowance, while the employee contributes 10%.
It is designed to replace NPS for new central government recruits and to serve as an optional scheme for current employees.
NPS, on the other hand, is a retirement plan introduced by the government to offer regular income after retirement for its subscribers.
New Deadline to Choose the Scheme is September 30
The government has recently extended the last date to opt for UPS by three months to September 30.
Previously, eligible individuals, including current employees, retired staff, and spouses of deceased pensioners, had to choose UPS by June 30, 2025.
