Govt Plans New Tax and Family Benefits to Boost UPS Adoption: Report
By Author | July 24, 2025
Income Tax Recent News – 2025
New Incentives to Make UPS More Attractive
The central government plans to introduce new tax incentives and family benefits to encourage more employees to opt into the Unified Pension Scheme (UPS), according to a report by The Financial Express.
One proposal under consideration is to classify UPS pension income as ‘salary’, which would allow retirees to claim the standard deduction—currently ₹75,000. Additionally, the government is considering extending pension benefits to dependent children, similar to the provisions in the Old Pension Scheme (OPS).
UPS Struggles with Low Adoption So Far
The UPS was launched after strong demands from both government employees and opposition parties for a guaranteed pension system. However, its reception has been limited.
Between April 1 and June 30, during the three-month transition window from the market-linked National Pension System (NPS), only about 30,000 individuals—around 1% of NPS subscribers—switched to the new scheme.
Family Benefits and Early Exit Rules Under Review
A senior government official stated that the Centre intends to expand benefits under UPS to include dependent children. This move would align UPS with the more generous structure of the former OPS.
The government may also clarify exit rules. Employees who resign before completing 10 years of service may be allowed to withdraw their own contributions, though they won’t qualify for a monthly pension unless they complete the minimum service period.
How UPS Works: Key Features
The UPS offers a guaranteed monthly pension equal to 50% of the employee’s last drawn salary, calculated as the average basic pay over the final 12 months of service. This pension is fully inflation-adjusted and becomes available at age 60.
If the pensioner passes away, their spouse receives 60% of the pension. Additionally, any employee who completes at least 10 years of government service is entitled to a minimum pension of ₹10,000 per month.
