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Budget 2017: Benefits announced for NPS subscribers

Budget 2017: Benefits announced for NPS subscribers

India Blooms News Service | | 02 Feb 2017, 02:07 pm
New Delhi, Feb 2 (IBNS): The Finance Bill 2017 laid down in the Parliament on Thursday introduced several new benefits for National Pension System (NPS) subscribers.

Tax-exemption to partial withdrawal from National Pension System (NPS):

The existing provision provides that payment from National Pension System (NPS)  to a subscriber  on closure of his account or opting out shall be exempt up to 40% of total corpus  at the time of withdrawal . The amount utilized for purchase of annuity is also tax exempt.

At the time of normal exit, 40% of the total corpus is mandatorily required to be purchased for annuity. The subscriber has the option to use higher amount for purchase of annuity.

In order to provide further relief to the subscriber of NPS, it has been proposed to insert a new clause to provide exemption on partial withdrawal not exceeding 25% of the contribution made by an employee in accordance with the terms and conditions specified under Pension Fund Regulatory and Development Authority Act, 2013 and regulations made there under.

This benefit will be effective on partial withdrawal made by the subscriber after April 1, 2017.

Further, contribution up to 20% of the gross Income of the self-employed individual (individual other than salaried class) will be deductible from the taxable income under Section 80CCD (1) of the Income Tax Act, 1961, as against 10% earlier.

This is with a view to provide parity between a salaried employee and a self-employed.

This benefit will be available on contribution made by the self employed persons on or after April 1, 2017.

This increased limit for tax benefit will help the self-employed individuals, to save taxes on higher contribution in NPS and thereby properly plan for their old age income security.

Additional tax deduction on investment upto Rs. 50,000 under Section 80CCD (1B) will continue for all NPS subscribers whether salaried or self-employed.