Bill exempts pension payouts from tax, extends benefits to Saudi investment fund

This Bill amends the Income-tax Act, 1961, and the Finance Act, 2025, to provide tax exemptions for payouts from the Unified Pension Scheme to government employees, extend tax benefits to investments by Saudi Arabia's Public Investment Fund, and clarify rules for abating pending tax assessments in search cases.

Who it concerns: Subscribers to the Unified Pension Scheme (government employees), the Public Investment Fund of the Government of the Kingdom of Saudi Arabia and its wholly owned subsidiaries, and taxpayers involved in pending assessment or reassessment proceedings related to search or requisition cases.

What the bill does

• Exempts up to 60% of the individual corpus paid from the National Pension System Trust to Unified Pension Scheme subscribers upon superannuation, voluntary retirement, or specific rule-based retirement.
• Exempts lump sum amounts received by Unified Pension Scheme subscribers as per specific Department of Financial Services notifications.
• Adds the Public Investment Fund of Saudi Arabia and its wholly owned resident subsidiaries to the list of 'specified persons' eligible for tax exemptions on income from investments in India (dividends, interest, capital gains).
• Specifies that amounts transferred from an individual corpus to a pool corpus upon retirement are deemed not received for tax purposes under Section 80CCD.
• Clarifies that pending assessments, reassessments, or recomputations for assessment years within a block period abate (are cancelled) on the date a search is initiated or a requisition is made, or on the date a notice is issued for other years in the block period.

Also in the document

• The Bill is based on an understanding reached between the Government of India and the Government of Saudi Arabia regarding direct tax benefits.
• The amendments are deemed to have been inserted with effect from April 1, 2025, for the Income-tax Act changes, and September 1, 2024, for the Finance Act changes.
• The Financial Memorandum states that no additional expenditure of significance is contemplated by the passing of this Bill.