New Rules for NPS withdrawal


New Pension System

New Pension System

Pension Fund Regulatory Development Authority (PFRDA) has recently come up with a new withdrawal rules for New Pension System or NPS. This partial withdrawal rule is permitted for few selected purposes only such as purchase of residential property,critical illness treatment ,higher education and children marriage. PFRDA has said in the circular that NPS subscribers who have contributed in the pension fund for minimum three years are eligible now to withdraw up to 25% of the accumulated corpus for the reasons specified above.Also, a subscriber can withdraw maximum three times from his pension fund during the entire tenure of subscription.Most interestingly, this partial withdrawal does not attract any tax liability on the subscriber. Earlier this withdrawal facility was for 10 years continuous subscribers only. Now, they have become little soft on facing lots of demand from the subscribers side.

Furthermore, if a subscriber has already owned a house property either singly or jointly apart from ancestral property, he can not withdraw partially any amount from his NPS account for this purpose.The circular also specified the types critical illnesses such as cancer,kidney failure,coronary artery bypass,heart valve surgery and paralysis.

If a subscriber wants to withdraw for the above mentioned grounds,he has to make an application to the central record keeping agency or the national pension system trust through nodal office. For self treatment of the subscriber the withdrawal request has to be made by the family member.

In recent year NPS has gained a huge popularity among the investors as a retirement product due to Govt. has provided an additional Tax benefit of Rs.50,000 u/s 80 CCD(1b) apart from 80C deductions from Budget 2015-16 on wards. Also, the maximum entry age has been increased from 60 years to 65 years.

Salaried individuals as well as self employed persons can claim tax deductions for investment in NPS under Tier I account only. Investment in Tier II account does not provide any tax benefits and no withdrawal limits as well. Under NPS 40% of the maturity corpus is tax free and 40% of the maturity corpus has to compulsorily be used for purchase of immediate annuity to earn a monthly pension.Though, the remaining 20% of the corpus is still taxable in the hands of the subscribers in the year of withdrawal.

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