UPS vs NPS: Big relief to government employees, now UPS will also get NPS tax benefits, opportunity to switch till this date..

There is good news for government employees. The Finance Ministry has also implemented the income tax benefits currently available under the National Pension System (NPS) on the Unified Pension Scheme (UPS). That is, central government employees who opt for UPS (Unified Pension Scheme) instead of NPS (National Pension System) will now also get the same tax benefits. This announcement was made through a press release issued on July 4, 2025.

According to the press release, "To further promote UPS, the government has decided that the tax benefits available under NPS, with necessary changes (Mutatis Mutandis), will also apply to UPS as it is an option under NPS. These provisions ensure parity with the existing NPS structure and provide adequate tax relief and incentives to employees opting for the Unified Pension Scheme (UPS)."

UPS will also get the tax benefits of NPS
This means that the tax benefits that central government employees get under NPS will also be available in UPS. That is, central government employees who opt for the UPS pension instead of the NPS will also get the same tax benefits. However, some necessary changes will be made in the tax rules considering the different nature of NPS.

What does the Latin phrase "mutatis mutandis" mean?

Mutatis mutandis means "making necessary changes without affecting the main point of the issue". The Finance Ministry said, "These provisions ensure parity with the existing NPS structure and provide adequate tax relief and incentives to employees who opt for the Unified Pension Scheme (UPS)."

What is the purpose of this decision of the government?

The ministry statement also said that the inclusion of UPS under the tax structure is another step of the government towards strengthening the retirement security of the Central Government employee through transparent, flexible, and tax-efficient options."

Let us tell you that the government has notified UPS as an alternative to NPS for new employees appointed in the Central Government Civil Service from April 1, 2025.

Last date to switch from NPS to UPS?
The Finance Ministry has extended the last date to switch from NPS to UPS from June 30, 2025, to September 30, 2025. That is, the employees who currently come under NPS have been given a one-time option to switch to UPS till September 30, 2025.

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