NPS(National Pension System)is a perfect retirement tool to provide regular pension during one’s retirement life. Earlier it was only for central government employees, but later it was made available to private employees and corporates too!
Why to invest in NPS?– One of the reason why NPS has became popular is it avails guaranteed pension during retirement as well as tax exemption up to 1.5 Lakh under section 80(C) and “Additional 50,000 rupees tax exemption under section 80CCD(1B)“
Current Norms on NPS– Till now, NPS subscriber can withdraw 60% of their corpus during retirement which is “Fully Tax-Exempt”. The remaining 40% corpus should be utilised to purchase an annuity.
But recently Modi Government relaxes some norms on NPS Contributions and withdrawals-
- Maximum age to invest in this scheme has been increased to 70(which was earlier 65). If the subscriber exits from this schem due to age load, he can re-enter the scheme by opening fresh NPS a/c
- If any subscriber of age more than 65 enters into this scheme, he must hold the scheme mandatory for 3 years. If in any case, he wants to withdraw before the completion of 3 years, 20% of the corpus only would be tax-exempt, while remaining should be used for annuity purchase.
- If the NPS Contribution is limited only to 5 Lakhs and the subscriber wants to exit from the scheme before age 60, he can withdraw “Entire Corpus” which was not possible earlier. There is no need to purchase annuity, he can withdraw the entire corpus. In this case 60% of the withdrawn corpus is “Fully Tax-Exempt” while the remaining 40% would be “Taxable“
- The subscription amount has been increased to 2.5 lakhs for remaining subscribers who wishes to exit prematurely.
These are the relaxations exercised by the central government to the NPS Subscribers. If you fall under above categories, make use of them and plan for your retirement accordingly.