Tax Breaks for Central Government Employees: UPS Now Mirrors NPS Benefits

In a move benefiting millions of central government employees, the Unified Pension Scheme (UPS) will now offer the same tax advantages as the National Pension System (NPS). This decision, announced by the government, aims to provide financial ease and encourage robust retirement planning. A recent notification from the Ministry of Finance clarifies that employees enrolled in the UPS will be eligible for tax benefits identical to those available under NPS. This includes TDS exemptions and deductions under sections 80C and 80CCD(1B). Furthermore, the deadline to switch to UPS has been extended, giving employees more time to consider their options. The new deadline is September 30, 2025. The extension applies not only to current employees but also to retired personnel and surviving spouses of deceased pensioners. The Unified Pension Scheme, implemented from April 1, 2025, is designed for those joining central government civil services on or after that date. UPS is seen as an alternative to NPS, promising a stable pension post-retirement. The contribution structure is as follows: Central Government: 18.5% of basic salary plus dearness allowance; Employee Contribution: 10%. This scheme is particularly attractive to those who prioritize the pension security offered by the Old Pension Scheme (OPS). The government is offering a one-time opportunity for current NPS participants to switch to UPS. The choice is entirely voluntary and employees must make an informed decision as switching back to NPS is not possible. The advantages of UPS include: NPS-equivalent tax benefits, a guaranteed monthly pension after retirement, a higher government contribution, financial stability, and all income tax benefits including TDS exemptions. The last date to make a decision is September 30, 2025, and the decision is irreversible.