NPS tax treatment at maturity has just got much better. Now, the entire permissible lump sum withdrawal (60%) from NPS is exempt from tax.
The government has granted NPS exempt, exempt or exempt or EEE status which means that like PPF (public provident fund) or EPF (employee provident fund) investment at the investment stage, accumulation and withdrawal stage will be tax free
Along with this, the Government announced a few more changes to NPS. NPS Tier II investments will also be eligible for tax benefit under Section 80C.
There is a lot of good news for Government NPS subscribers. Government contribution has gone up. There is a greater flexibility in how they can manage their NPS investments.
Find below four changes which Government has brought in this product:
|Sno||New National Pension Scheme (NPS) Rules|
Taxation of NPS Maturity proceeds:
|2||Tax Benefit for investment in NPS Tier II:
|3||Increase in Government Contribution(Applicable to Central Govt Employees):
|4||Choice of pension fund managers and investment allocation(Applicable to Central Govt Employees):
By making above changes in the NPS rules, the Government has made strong case for us to relook at NPS from retirement perspective. A Great move for Government Subscribers.
However kindly note, it is a very long-term investment product, so make sure you understand the implications and the working of NPS before opening an account. Estimate the amount of monthly savings required to meet your post-retirement expenses, keeping the inflation and your life expectancy in mind. Diversify across various investments, including mutual funds and NPS, but do not bank entirely on the latter.
Annuities can provide a baseline support to meet household during retired years, but choosing NPS to accumulate a retirement corpus remains a choice which one needs to take now. A corpus created through a mix of mutual funds can still buy you an Immediate Annuity scheme when you are 60, with all your savings at your disposal.