In a chat with Mythili
Bhusnurmath of ET Now, Yogesh Agarwal, Former Chairman, PFRDA, shares his views
on what ails the National Pension Scheme. Excerpts:Mythili Bhusnurmath: Why is that the NPS has got such little salience with the public at large? Apart from government employees who had no option, the offtake has not been as good as one would have anticipated?
Yogesh Agarwal:
Largely, one issue has to be sorted out with the government. This is the most
sophisticated and modern product that we have come up with. The world over
wherever I have travelled, they have said that NPS is one of the most
beautifully-designed schemes, but the problem comes with the marketing of the
scheme, the problem is that with the taxation of the scheme the Government of
India in its own wisdom has decided to accord. This is the only pension product
or the social security product which is taxed at maturity. All other competing
products, including EPS and PPF, are EEE.
So, when people come
to know that whatever they are going to save for their pension, one-third of it
is going to be taken away at their retirement age when they need it the most,
people are not willing to come forward. When we talked to the corporates,
everybody said it is a beautiful product, you get the tax treatment on par with
the other products, "we will just flock in and we have been raising this
with the government and they have been promising us a level playing
field." If you are going to tax the NPS when a person retires at 60, most
of these people will be in the 30% tax bracket. Maybe till one month before
retirement he will be not in the taxable bracket, but on retirement the corpus
will run into lakhs and that will be taxable at 30%. That is the problem which
is coming up with the NPS.
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