Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now


You can switch off notifications anytime using browser settings.
11,914.40-54.0
Stock Analysis, IPO, Mutual Funds, Bonds & More

Early withdrawal from NPS will be tax-free

They can contribute up to 10% of their income to NPS as own contribution and another 10% as employer’s contribution.

, ET Bureau|
Updated: Feb 02, 2017, 12.18 AM IST
0Comments
Since 40% of this Rs 1.75 lakh or Rs 70,000 is tax-free at retirement, the total tax-free amount goes up to Rs 95,000 (Rs 25,000 + Rs 70,000).
Since 40% of this Rs 1.75 lakh or Rs 70,000 is tax-free at retirement, the total tax-free amount goes up to Rs 95,000 (Rs 25,000 + Rs 70,000).
MUMBAI: Early withdrawals from the National Pension System (NPS) will not attract tax, the Budget has clarified, and experts suggest using this route to increase the tax-free component of your retirement corpus.

An NPS subscriber can withdraw 25% of his contribution to the corpus for emergencies before retirement. For instance, let us assume that your corpus now is Rs 2 lakh -- Rs 1 lakh contributed by you and the remaining by your employer. Instead of withdrawing the entire amount at retirement, you can withdraw Rs 25,000, or 25% of your contribution, earlier, without any tax incidence. The remaining Rs 1.75 lakh is withdrawn on retirement.

Since 40% of this Rs 1.75 lakh or Rs 70,000 is tax-free at retirement, the total tax-free amount goes up to Rs 95,000 (Rs 25,000 + Rs 70,000). Had the entire amount been withdrawn at retirement, the tax-free component would have been Rs 80,000.

Moreover, till now salaried NPS subscribers enjoyed an extra advantage. While they can contribute up to 10% of their income to NPS as own contribution and another 10% as employer’s contribution, the selfemployed were allowed to contribute only 10% of their income.

Now, self-employed individuals are eligible for deduction up to 20% of gross total income for contribution made to NPS. “It is good that the anomaly regarding the NPS exemption has been rectified in the Budget,” said Manoj Nagpal, CEO, Outlook Asia Capital.

Also Read

NPS partial withdrawal rules and how it is taxed

EPS-NPS switch shelved as trade unions object

EPS-NPS switch shelved as trade unions object

NPS pension benefits are not same for voluntary and normal retirement

Now, Overseas Citizens of India can invest in NPS

Comments
Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.

Other useful Links


Follow us on


Download et app


Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service