NPS Update: The National Pension System (NPS) is an excellent investment plan for those looking to secure their retirement. This plan not only provides a monthly pension but also offers tax benefits to investors. Furthermore, a large maturity corpus based on investment is also tax-free. NPS has now been made more flexible, allowing continued investment not only during employment but also after retirement.
What are the new NPS rules?
The Pension Fund Regulatory and Development Authority (PFRDA) has made several changes to the NPS. Now, even retired individuals can continue investing in the scheme. The investment age limit has been increased from 60 to 65 years, and investments are now permitted up to 70 years. This change is beneficial for investors who want to grow their pension fund even after retirement.
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60% Withdrawal Option
After investing in the NPS scheme, it is not possible to withdraw the entire corpus. Upon retirement, investors are required to set aside at least 40% of the corpus for annuity or pension. The remaining 60% can be withdrawn in a lump sum. However, investors now have the option to leave the corpus in their account even after retirement and gradually receive it as a pension.
Tax Benefits
Investing in the NPS scheme provides investors with tax benefits. Investors can avail tax benefits under sections 80CCD(1), 80CCD(1B), and 80CCD(2). Specifically, 80CCD(1B) provides an additional deduction of up to ₹50,000, over and above the deductions available under section 80C. This helps investors reduce their overall tax liability.
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How many types of NPS are there?
There are two types of NPS accounts: Tier One and Tier Two. Tier One accounts are the main investment accounts, from which funds can be withdrawn only after certain conditions are met. Tier Two accounts are more flexible and can be used like a regular savings account, with no specific withdrawal restrictions. Thus, investors can leverage both accounts according to their needs and plans.