1259886 Lakh Returns were filed in first month of AY 2024-25

Compared to the same period a year ago, there has been a 19% drop in the addition of new subscribers of the National Pension System (NPS) in the corporate segment in H1 (April-September) of FY24, and officials are attributing the deceleration to the higher exemption limit of income tax of Rs 7 lakh announced in the Union Budget, the Business Standard has reported.

The data has been culled from that issued by the Ministry of Statistics and Programme Implementation (Mospi).

The employees of central and state public sector undertakings, besides private sector employees, are referred to as corporate subscribers. These are mainly voluntary enrolments.

The monthly breakdown of the NPS enrolments in the first half of FY23 and FY24 respectively are – April 23,306 and 11,166, May 17,431 and 16,793, June 20,690 and 14,395, July 27,569 and 29,333, August 15,502 and 13,829, September 15,256 and 11,421.

In the budget speech on February 1, 2023 Union finance minister Nirmala Sitharaman said that according to the new income tax system, the government was raising income tax exemption limit from Rs 5 lakh earlier to Rs 7 lakh. It implied that anyone earning less than Rs 7 lakh a year need not invest anything to claim IT exemption. Their entire income would be free from income tax.

“People enrol under the corporate component of the NPS to take tax benefits as they see it as a tax-saving instrument, rather than a long-term pension or savings product. So, when the finance ministry [decided to] raise the exemption limit earlier this year, people belonging to these income slabs saw no incentive to enrol under the NPS, and this explains the decline in subscribers starting March itself,” said an official.

A few experts interpreted it as more disposable income in the hands of the common man. Investment advisor Deepesh Raghav said it lent higher ability to the middle-class group to consume more. They could spend without bothering to save and invest in the tax-saving schemes, of which NPS is a prominent one. However, he also expressed concern about the deceleration since it is imperative that the average person save and invest for life after work.

“In all its years of operation, NPS has suffered due to the lack of awareness among the employees and poor product placement in the market. It is time that we position it differently, other than as a tax-saving instrument. [We] have also written to the finance ministry to look at the issue and make it more attractive to the people to save and invest in it,” said the bureaucrat mentioned above.