Attempts by the pension fund regulatory and development authority (PFRDA) to bring employees of public sector undertakings under the National Pension System (NPS) has hit a “tax hurdle”.

There is no tangible movement in this direction, as any such migration could lead to levy of income tax on the employee, Hemant Contractor, Chairman, PFRDA has said.

Contractor said the PFRDA is in talks with the government to sort out the tax issue so that PSU employees can also opt for the NPS. The NPS is a defined contribution scheme that became operational from January 1, 2004, wherein the final corpus depends upon the contribution made by the subscribers and the investment returns.

From January 1, 2004, NPS was applicable to all new Central Government employees, except the Armed Forces. With effect from May 1, 2009, NPS was made available to all Indian citizens on voluntary basis. In December 2011, the PFRDA introduced a corporate sector model to provide NPS to employees of corporate entities of private and public sector enterprises. However, public sector employees have not boarded the NPS train due to several reasons, the main one being tax.