Early
Withdrawal from National Pension System- NPS will be Tax-Free - 25% OF CORPUS
CAN BE TAKEN OUT..!
Mr. Narendra Nathan, ET
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lakh is withdrawn on retirement.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 Had the entire amount been withdrawn at retirement, the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 Mr. Manoj Nagpal, CEO,
Outlook Asia Capital.
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