NPS Tax Benefits for Pensioners: In order to reduce the tax burden of the citizens above 70, the citizens will not have to pay tax on the money deposited in the NPS after the age of 75, it may be announced in the upcoming budget.
You must have heard that the budget is going to be presented at the beginning of next month. It was learned that the government is going to provide tax exemption benefits for senior citizens before that budget.
NPS Tax Exemption for Senior Citizens
The central government is going to take some such steps to make the National Pension Scheme more popular. It is known that citizens above 75 years of age may be exempted from tax on investments and withdrawals in NPS in the coming days.
The Pension Funds Regulator or PERDA wants to keep NPS at par with EPFO in terms of tax exemptions. Even employers’ investments are tax-deductible to ensure equity.
PERDA has also thought about the issue of tax exemption benefits that may be discussed in the budget. Union Finance Minister Nirmala Sitharaman will present the budget on February 1. This is going to be his sixth budget.
You know that, at present, withdrawal of 60 percent of the total corpus is considered tax free. Under the old tax law, investments in NPS are eligible for nps tax exemption limit up to Rs 1.5 lakh. This nps tax exemption section is available under Section 80C of the Income Tax Act.
How Much Tax Exemption for NPS
Investments in NPS of individuals who is currently working in an organization are subject to tax exemption up to 10 percent of basic salary and DA on the contribution made by the organization. But on the other hand, 12 percent ‘corpus’ on the same investment is treated as tax free in EPFO.
In order to popularize NPS and reduce the tax burden on citizens above 70 years, citizens will not have to pay tax on money saved in NPS after the age of 75, it may be announced in the upcoming budget. That is, if pension continues after 75 or transactions are made in NPS, senior citizens no longer need to file tax.
Also recently Pension Fund Regulatory and Development Authority (PERDA) has made some changes in the withdrawal rules for NPS. This rule will be effective from 1st February.
According to this new, investors in NPS can withdraw only 25 percent of the money they have in the fund in one go, excluding the company’s investment. Customers can make partial withdrawal for various reasons.
Basically these factors are fixed in this new rule. It is known that money cannot be withdrawn in one go for any other reason except for certain things like marriage of children, starting own business, buying a house if one does not have a house.
Also visit the official website of NPS for more detailed information on this topic.
1. How much amount of NPS is tax free?
Upto 60% of the total corpus withdrawn in lump sum is exempt from tax.
Here for example: If total corpus at exit is Rs.10 lakhs cross then 60% of the total corpus i.e. 6 lakhs that you can easily withdraw your amount without paying any incometax.
2. Is NPS taxable after 60 years?
According to section 10 provides a tax exemption facility on a lump sum basis withdrawal of 60% of accrued NPS funds which upon reaching above 60 years or old age.
3. Is NPS good for senior citizens?
Yes, NPS can minimize the tax burden for senior citizens after retirement through the provision of relief facility on both contribution and annual payments time.