Finance Minister Pranab Mukherjee played hot and cold with investors seeking to invest in

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the new pension system (NPS). He provided some incentives by exempting the system from the provisions of Securities Transaction Tax (STT) and income of the NPS Trust from income tax.

But at the same time, he has decided to retain the exempt-exempt-taxed status for NPS, which came as a dampener for investors.

Another positive for the sector was the announcement that investment in the system by self-employed persons will enjoy the benefits of Section 80CCD, a sub-section under Sec 80C that allows deductions up to Rs 100,000 on investments made in different classes of assets. Hitherto, only the salaried class could avail of tax benefits for investing in NPS.

Rani S Nair, executive director of Pension Fund Regulatory and Development Authority, said though the authority would have liked to move to the exempt-exempt-exempt status, which allows tax exemption even at the withdrawal stage. “The steps will improve the net asset value of subscribers’ contribution,” Nair said.

Balram Bhagat, CEO of UTI Retirement Solutions, said, “Removal of the STT in the sale or purchase of equity shares or derivatives by NPS Trust will have a positive impact on the NAV of a pension fund.”