Changes in tax on lumpsum and premature withdrawals under UPS and NPS in the latest version of Income Tax Bill

FM Nirmala Sitharaman introduced the Taxation Law (Amendment) Bill, 2025, in Lok Sabha, aiming to align the tax treatment of the Unified Pension Scheme (UPS) with the National Pension System (NPS). The bill proposes income tax exemptions for UPS payments up to 60% of the corpus at retirement. Also, in case a UPS subscriber or their nominee receives funds from the scheme before their superannuation, retirement or voluntary retirement, it will be taxable in their hands.