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NPS withdrawal made 100% tax free
News:
Government make entire NPS withdrawal at the time of retirement tax free.
Facts:
- At present, 40% of the total accumulated corpus utilized for purchase of annuity is tax exempt. Of the remaining 60% corpus withdrawn by the NPS subscriber at the time of retirement, 40% is tax exempt and 20% is taxable (included the principal as well as the gain) The tax exemption is now extended to the entire 60%.
- The Centre will contribute 14% of basic salary to the pension corpus of government employees.
- The employee’s contribution will remain at 10%, bringing the total contribution to 24%
- The NPS was launched in January 2004 for government employees and was opened to private sector employees in 2009
Benefit:
- Now that 60% of the corpus will be tax free on maturity, NPS will now be comparable with the Public Provident Fund and Employee Provident Fund and better than any other financial savings product.
- Government employees will now have more investment options too.
Additional Facts:
- About National Pension Scheme (NPS)
- It was launched in January 2004 for government employees. However, in 2009, it was opened to all sections.
- The scheme allows subscribers to contribute regularly in a pension account during their working life. On retirement, subscribers can withdraw a part of the corpus in a lumpsum and use the remaining corpus to buy an annuity to secure a regular income after retirement.
- Any Indian citizen between 18 and 60 years can join NPS
There are several provident fund accounts available in India
- Employee Provident Fund Account – Available for organised sector employee and the account is mandatory for a certain salary class employed with the government. Employees working with private companies are not eligible for the account.
- Public Provident Fund Account – It is a savings cum tax savings account offered in India. The account holder should deposit a minimum of Rs.500 is in order to open and maintain PPF account and the maximum that can be deposited is Rs.1.5 lakh
- Non-Resident Indians and Hindu Undivided Family individuals are not eligible for a PPF account.
- General Provident Fund Account – GPF is available only for government employees while PPF is available for the self-employed and other income sectors of the society
- GPF is managed by the Department of Pension and Pensioner’s Welfare under the Ministry of Personnel, Public Grievances and Pensions.
