Government employees will receive additional pension as the cabinet approves raising government contribution towards National Pension Scheme (NPS) to 14 percent of the basic salary from the current 10 percent, according to a PTI report citing unnamed sources. The minimum contribution by the employee will, however, remain at 10 percent.

The report further said that the Cabinet also approved tax incentives under 80C of the Income Tax Act for employees' contribution to the extent of 10 percent.

The cabinet, headed by Prime Minister Narendra Modi, also decided to allow government employees to shift 60 percent of the accumulated amount in the fund on retirement instead of the present 40 percent. Additionally, the employees will have the option to invest it in fixed income instruments or equities, the report said.

It was also decided that if the employee decides to not commute any portion of the NPS fund, the whole accumulated portion at the time of retirement will be transferred towards the annuity scheme where his/her pension will be more than 50 percent of his/her last drawn pay.

The government did not announce the decision on account of the ensuing polls in Rajasthan today, the sources said. The changes could likely come into effect from the next financial year, that is 1 April 2019.