NPS (National Pension System) : Tax provisions on investment & Withdrawal
Investment Deduction:
–Section 80CCD (1): Employee Contribution up to Rs. 1.5 lac under Sec 80CCE
-Section 80CCD (1B): Employee Contribution Rs. 50,000 over and above the deduction of Rs. 1.5 lakh
-Section 80CCD (2): Employer Contribution up to 10% of salary (Basic + DA), without any monetary limit
Withdrawal
Partial withdrawal (before the age of 60): up to 25% of Subscriber contribution is exempt from tax
Annuity purchase: Fully exempt, annuity income in the subsequent years will be subject to tax
Lump-sum withdrawal: After attaining the age of 60, up to 40% of the total corpus is exempt
Partial Withdrawal:
Withdrawal is allowed only against the specified reasons, for example; Higher education of children, Marriage of children, for the purchase/construction of residential house (in specified conditions), for treatment of Critical illnesses
*Subscriber should be in NPS at least for 3 years
*Withdrawal amount will not exceed 25% of the contributions made by the Subscriber
*Withdrawal can happen maximum of three times during the entire tenure of subscription.
Exit from NPS:
Superannuation:
have to use at least 40% to purchase an annuity for regular monthly pension;
Remaining funds can be withdrawn as lump sum;
*Can opt for 100% withdrawal if the total pension corpus is less than or equal to Rs. 2 lakh
Pre-mature Exit: at least 80% of the accumulated to be utilized for purchase of an Annuity for regular monthly pension; Remaining funds can be withdrawn as lump sum
*only after completion of 10 years
*Can opt for 100% withdrawal if the total corpus is less than or equal to Rs. 1 lakh
Upon Death: Entire accumulated pension corpus (100%) would be paid to the nominee/legal heir
Options on Superannuation:
Continuation of NPS: beyond the age of 60 years/superannuation (Up to 70 years). contribution beyond 60 is also eligible for exclusive tax benefits under NPS
Deferment: Defer Withdrawal and stay invested in NPS up to 70 years of age. Subscriber can defer only lump sum Withdrawal, defer only Annuity or defer both lump sum as well as Annuity.
Start Pension: Subscriber can exit from NPS. have to use at least 40% to purchase an annuity for regular monthly pension; Remaining funds can be withdrawn as lump sum;
*Can opt for 100% withdrawal if the total pension corpus is less than or equal to Rs. 2 lakhs
Annuity Options
-Annuity for life– On death of the annuitant, payment of Annuity ceases
-Annuity for life with return of purchase price to the nominee on death
-Annuity payable for life with 100% Annuity payable to spouse on death of annuitant
-Annuity payable for life with 100% Annuity payable to spouse on death of annuitant with return on purchase of Annuity
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