Friday, February 3, 2023

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Old V/s New Pension Scheme: Know key differences, other details

Old V/s New Pension Scheme: After three states—Rajasthan, Chhattisgarh, and Jharkhand—reverted back to the Old Pension Scheme and abandoned the New Pension Scheme, there have been rumours about the change in pension schemes. Recently, the Punjabi government transferred its personnel back to OPS. The distinctions between the Old and New Pension Schemes may now be on your mind.

Old Pension Scheme

An approved retirement programme by the government is called OPS, or Old Pension Scheme. From it till the end of their service lives, the beneficiaries receive a monthly pension. Half of the individual’s most recent salary is represented by the monthly pension.

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Depending on which option is best advantageous to them, OPS employees are entitled to receive 50% of their final drawn basic salary plus a dearness allowance upon retirement.

New pension scheme

A retirement programme known as NPS, or New Pension Scheme, was launched by the Indian government in 2004. After retirement, NPS participants will be permitted to take 60% of their investment.

Key differences between NPS and OPS

  • While the NPS system can be changed from OPS to NPS, the reverse is not possible. In general, central government personnel have the option to return to OPS in the event of their death or disability.
  • In OPS, pensions are not taxed; however, in NPS, 60% of the corpus is tax-free while the remaining 40% is subject to tax.
  • Government workers who take part in this NPS contribute 10% of their base salary, with the employer matching up to 14% of that amount.
  • The New Pension Scheme reimburses employees for the contributions they made while they were employed by the NPS Scheme, whereas government employees are eligible for pensions under the Old Pension Scheme based on their last received wage.
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  • While NPS personnel receive a lump sum payment upon retirement and 60% of their last drawn salary is invested in annuities in order to obtain a monthly pension, OPS employees receive 50% of their last drawn salary as a pension.
  • In contrast to NPS, where employees can deduct up to 50,000 from other investments and 1.5 lakh from their taxes, OPS offers no tax benefits.
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