The subscribers of the NPS or National Pension Scheme can now withdraw their partial contributions. This was said in a circular from Pension Fund Regulatory Development Authority (PFRDA). The regulator of the pension has decided an upper limit of 25 % of the total contributions, which can be withdrawn. The PFRDA has given this permission, so that the specified expanses of the subscribers can be met.
The subscribers, who are contributing for 3 years, can now withdraw near 25 % of the corpus. The subscribers can withdraw this for meeting specified expanses like purchase of residential property, “Critical Illness” Treatment, higher education as well as children’s marriage.
The NPS is a defined and voluntary contribution retirement scheme in which the subscribers can accumulate his / her savings during the working life. Two types of accounts can be opened under this scheme, namely the Tier 1 and Tier 2 accounts. The Tier 1 account is the type, in which no amount can be withdrawn before reaching the age of 60. Only in specific cases a partial withdrawal is allowed. In the Tier 2 scheme, the subscribers are free to withdraw money, as and when required. In the circular which was issued by PFRDA it is stated that no withdrawal is permitted if the person has a house or flat in his name, either individually or in the form of the joint account. The funds can be withdrawn in case of any critical illness like kidney failure, cancer, heart attack, heart valve surgery or paralysis.
Benefits of the NPS or the “National Pension Scheme”:
For various salaried professionals, up to 10 percent of salary investment is “deductible” from the taxable income. This comes under the Section 80CCD. Besides this, the investment of 50000 is also deducted from the taxable income. This comes under the Section 80CCD (1B).
The contributions can be made either directly or through the working employer. In the case, the investment is through the employer, the contribution of the employer to the NPS, which will be 10 % of the basic salary, is allowed for the deduction under the section 80CCD (2).
In case you are self employed, an investment up to 20 % of gross income is deductible from the taxable income. This is subject to a limit of 1.5 Lakhs. This was previously limited to 10 % as per the previous guidelines. This was changed in budget 2017. In addition to this, an investment of near 50000 is deductible from the taxable income. This is according to the Section 80CCD (1B) of the IT (Income tax) Act, 1961.
In the case you want to opt for a partial withdrawal before the age of 60, then 25 % of the contribution will be from the income tax. During this period, 40 % of the corpus, which is withdrawn in the lump sum gets withdrawn from the tax, till the subscriber achieve the age of 60.
Thus, we have seen that as per the latest progress, now 25 % of the corpus can be withdrawn for specific purposes.