Tax Treatment Under Unified Pension Scheme (UPS) - DOP OM dated 04/07/2025

OFFICE MEMORANDUM: Tax Treatment Under Unified Pension Scheme (UPS)

Subject: UPS Tax Benefits under NPS Framework

The Government of India’s Ministry of Finance, Department of Financial Services, has issued clarifications regarding the tax treatment of the Unified Pension Scheme (UPS), introduced as an option under the National Pension System (NPS) vide Gazette notification dated 24th January 2025.

Key Tax Provisions for UPS:

• Sections 80CCD(1), 80CCD(1B), 80CCD(2), 80CCD(3), 80CCD(4), 10(12A), and 10(12B) of the Income Tax Act, 1961 apply to UPS, mirroring NPS benefits.
• Tax deductions and exemptions are subject to prescribed limits under these sections.
• Legislative amendments required for any deviations in payout/contributions.

Implementation Directives:

1. Circulate this pension reform notification to all central government employees, retirees, and spouses of deceased retirees.
2. UPS will operate within the existing NPS architecture regulated by PFRDA.

Stakeholders Addressed:

The memorandum is forwarded to all Ministries/Departments, including:

• Ministry of Communications (Department of Posts)
• Ministry of Defence
• Ministry of Personnel, Public Grievances & Pensions
• ... and 85+ other entities (as listed in Annexure).

Keywords: Unified Pension Scheme, UPS, NPS tax benefits, pension reforms, government employees, 80CCD deductions, PFRDA, retirement savings, central government pension.

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