Big Relief for Employees: Unified Pension Scheme Gets NPS-Like Tax Benefits

The Central Government has extended significant benefits to its employees. Individuals opting for the Unified Pension Scheme (UPS) will now enjoy the same tax advantages currently available under the National Pension System (NPS). This move not only brings financial relief to employees but also promotes stability and transparency in retirement planning. The Ministry of Finance has issued a notification outlining that central government employees choosing the UPS scheme will receive tax exemptions similar to those under NPS. This means that tax benefits such as TDS exemptions and tax deductions under sections 80C and 80CCD(1B) will now also apply to the UPS scheme. Additionally, the deadline for switching to UPS has been extended from June 30th to September 30th, 2025. This opportunity is available not only to current employees but also to retired employees and dependents (spouses) of deceased pensioners. The Unified Pension Scheme was implemented by the central government from April 1, 2025. It is designed for those who joined central government civil services on or after April 1, 2025. UPS is considered an alternative to NPS, promising employees a secure and permanent pension after retirement. The contribution structure in UPS is as follows: Central Government: 18.5% (basic salary + dearness allowance) Employees: 10% contribution. This scheme is seen as more advantageous for those seeking pension stability, similar to the Old Pension Scheme (OPS). The central government is offering all current NPS employees a one-time voluntary option to switch to UPS. This is entirely optional and at the employee’s discretion. Once UPS is chosen, employees cannot revert to NPS, making a thoughtful decision crucial. UPS offers several benefits: NPS-like tax benefits (exemptions under 80C and 80CCD(1B)), a guaranteed monthly pension after retirement, a higher contribution from the central government (18.5%), financial stability and security, and all income tax benefits including TDS exemptions. The final date to make a decision is September 30, 2025. This option is a one-time opportunity and the decision is irreversible after selection.