Will Central Govt employees get NPS-like tax benefits under UPS? Finance Ministry clarifies

The Ministry of Finance on Friday (July 4, 2025) clarified that tax benefits available under National Pension System (NPS) shall apply to the Unified Pension Scheme (UPS). However, necessary changes in rules will be made to adapt the NPS tax benefits under NPS to UPS.

"In a bid to provide further impetus to the UPS, the Government has decided that tax benefits as available under NPS shall apply mutatis mutandis to UPS as it is an option under NPS," the Finance Ministry said.

The ministry's statement means that tax benefits that are currently provided to Central Government employees under the NPS will also be available under the UPS. But necessary adjustments in tax rules will be made to fit the context of the UPS.

In other words, the provisions for tax benefits under NPS will be adapted as needed to apply appropriately to UPS. But the the core benefits will remain equivalent.

"These provisions ensure parity with the existing NPS structure and provide substantial tax relief and incentives to employees opting for the Unified Pension Scheme," the Finance Ministry further said.

"The inclusion of 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," it added.

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.