Centre Allows One-Time Switch from UPS to NPS for Govt Employees
NPS: The Unified Pension Scheme was introduced earlier this year as an option under NPS for employees joining the Central Government Civil Services from April 1, 2025. Existing government employees who are already under NPS have also been given the option to join UPS.
Amidst the demand for old pension, the central government has given a big gift to lakhs of government employees. Now government employees will be able to change from UPS to National Pension System (NPS) in one go. The government said that this facility will be unilateral. Once employees transition from UPS to NPS, they will not be able to return to UPS.
The Unified Pension Scheme was launched earlier in the year as an option within NPS for employees who are joining the Central Government Civil Services on or after April 1, 2025. Current government employees already covered under NPS have also been provided with the opportunity to opt for UPS. In March 2025, the Pension Fund Regulatory and Development Authority (PFRDA) had issued the related rules for UPS. As of July 20, about 31,555 central government employees have opted for the Integrated Pension Scheme (UPS). The last date for enrollment under this scheme is September 30.
The Finance Ministry said in an office memorandum that it has been decided that a one-time, one-way switch facility from UPS to NPS will be made available to all central government employees who have opted for UPS. The government said that employees taking UPS can avail the switch facility at any time. This can be one year before the date of retirement or three months before the estimated date of retirement in case of voluntary retirement.
The government has also increased the benefit of retirement gratuity and death gratuity under UPS. At the same time, government employees opting for UPS under NPS will also be eligible for the option to avail benefits under CCS (Pension) Rules, 2021 or CCS (Extraordinary Pension) Rules, 2023 in the event of death of the government employee during service or his retirement on the basis of invalidity or disability. The government has also provided tax benefits to UPS on the same basis as NPS under the Income Tax Act, 1961.
At present, employees contributing to NPS get tax exemption up to 10 per cent of salary (basic and DA) under section 80 CCD (1) within the total limit of Rs 1.50 lakh under section 80 CCE. Apart from this, up to Rs 50,000 more tax exemption is available under section 80 CCD (1B). Up to 10 percent of the salary (basic and DA) contributed by the employer is tax-exempt under Section 80 CCD (2). On the other hand, if such contribution is made by the Central Government, then under 80 CCE, tax exemption of up to 14 per cent is available even after the total limit of Rs 1.50 lakh.
