NPS Made More Investor Friendly: 10 Facts
National Pension System (NPS) got a big boost when the government in the
Budget had announced an additional tax deduction of up to Rs 50,000 on
investment in the pension fund. Now, the pension regulator, Pension Fund
Regulatory and Development Authority (PFRDA), has made a few changes to
the scheme to make it more attractive.
Here is a 10-Point Cheat-Sheet
1) Up to 3 partial withdrawals will now be allowed, subject to certain conditions. The withdrawal should not exceed 25 per cent of the contributions made by the subscriber (excluding contribution made by employer, if any) and the duration between two withdrawals should be a minimum of five years.
2) To become eligible for partial withdrawal, the subscriber should have been in the National Pension System for at least ten years. The purpose for partial withdrawal should be for education and marriage of children, construction of house or treatment of specified disease. This minimum 5-year gap, however, is not applicable in case for partial withdrawal for critical illnesses.
3) Earlier, subscribers, who wished to exit from NPS before attaining the age of 60, could withdraw up to 20 per cent of the sum accumulated till that point of time. They had to mandatorily buy annuity with the rest of the money. (Annuity is a financial product that gives you periodic income or pension.)
4) In another change, if the accumulated pension wealth of an NPS subscriber is equal to or less Rs 2 lakh on reaching 60 or on superannuation, the subscriber will have the option to withdraw the entire accumulated pension wealth without purchasing annuity.
5) Earlier, on reaching 60 or superannuation, at least 40 per cent of the accumulated fund had to be mandatorily used for purchase of an annuity and the balance was paid as a lump sum payment to the subscriber.
6) The subscribers can now have the option to defer the withdrawal of lump sum amount until they attain the age of 70.
7) The subscribers will also have the option to defer the purchase of annuity for a maximum period of three years, from the date of attainment of 60 years of age or the age of superannuation.
8) Financial experts say since annuity income is taxable, subscribers can choose to defer the annuity to maximize their tax benefits.
9) Non-government subscribers can now contribute to subscribe to the National Pension System beyond the age of 60 years or the age of superannuation, not exceeding the age of 70. This provision will be helpful for people who work beyond the age of 60 or superannuation.
10) The new rules also make the subscriber's money in the NPS account not liable to seizure or attachment by process of any court at the instance of a creditor.
Here is a 10-Point Cheat-Sheet
1) Up to 3 partial withdrawals will now be allowed, subject to certain conditions. The withdrawal should not exceed 25 per cent of the contributions made by the subscriber (excluding contribution made by employer, if any) and the duration between two withdrawals should be a minimum of five years.
2) To become eligible for partial withdrawal, the subscriber should have been in the National Pension System for at least ten years. The purpose for partial withdrawal should be for education and marriage of children, construction of house or treatment of specified disease. This minimum 5-year gap, however, is not applicable in case for partial withdrawal for critical illnesses.
3) Earlier, subscribers, who wished to exit from NPS before attaining the age of 60, could withdraw up to 20 per cent of the sum accumulated till that point of time. They had to mandatorily buy annuity with the rest of the money. (Annuity is a financial product that gives you periodic income or pension.)
4) In another change, if the accumulated pension wealth of an NPS subscriber is equal to or less Rs 2 lakh on reaching 60 or on superannuation, the subscriber will have the option to withdraw the entire accumulated pension wealth without purchasing annuity.
5) Earlier, on reaching 60 or superannuation, at least 40 per cent of the accumulated fund had to be mandatorily used for purchase of an annuity and the balance was paid as a lump sum payment to the subscriber.
6) The subscribers can now have the option to defer the withdrawal of lump sum amount until they attain the age of 70.
7) The subscribers will also have the option to defer the purchase of annuity for a maximum period of three years, from the date of attainment of 60 years of age or the age of superannuation.
8) Financial experts say since annuity income is taxable, subscribers can choose to defer the annuity to maximize their tax benefits.
9) Non-government subscribers can now contribute to subscribe to the National Pension System beyond the age of 60 years or the age of superannuation, not exceeding the age of 70. This provision will be helpful for people who work beyond the age of 60 or superannuation.
10) The new rules also make the subscriber's money in the NPS account not liable to seizure or attachment by process of any court at the instance of a creditor.
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