The Finance Ministry announced on Friday that the tax benefits available under the National Pension Scheme (NPS) will apply mutatis mutandis to the Unified Pension Scheme (UPS), as it is an option under the former.
The measure aims to provide further impetus to the UPS. These provisions ensure parity with the existing NPS structure and provide substantial tax relief and incentives to employees opting for the UPS, according to the Finance Ministry statement.
The term mutatis mutandis means with all the necessary changes being made. The legal term clarifies that although changes will be necessary in order to take account of different situations, the basic point remains the same.
The inclusion of the UPS under the tax framework marks another step forward in the government’s effort to strengthen retirement security for Central government employees through transparent, flexible and tax-efficient options, the Finance Ministry said.
The Finance Ministry had notified the introduction of the UPS as an option under NPS for the recruits to the Central government service with effect from April 1, 2025, giving a one-time option to the Central government employees covered under the National Pension System (NPS) for inclusion under the UPS.
To operationalise this framework, the Pension Fund Regulatory and Development Authority (PFRDA) notified the PFRDA (Operationalisation of the Unified Pension Scheme under NPS) Regulations, 2025 on March 19, 2025.
These regulations enable the enrolment of three categories of Central government employees. The first category covers existing employees in service as on April 1, 2025, who are covered under the NPS, while the second category includes new recruits in the Central government services, who join service on or after April 1, 2025.
The third category includes Central government employees who were covered under NPS and who have superannuated or voluntarily retired or have retired under Fundamental Rules 56(j) on or before March 31, 2025 and are eligible for UPS or the legally wedded spouse in case of a subscriber who has superannuated or retired and has passed away prior to exercising the option for UPS.
The Finance Ministry had also announced on May 30 that the Central government NPS subscribers who retired on or before March 31, 2025, with a minimum 10 years of qualifying service, or their legally wedded spouse can now claim additional benefits under Unified Pension Scheme (UPS), over and above the NPS benefits already claimed.
