FM provides relief for NPS subscribers
However, Sandip Shrikhande, CEO, Kotak Mahindra Pension Fund , said ``From a NPS point of view, the budget has proved to be a bit of a dampener. 14% limit is applicable only to the Central Government's contributions to its employee's account. Similarly, 80C exemption on Tier II contributions is available only to Central Government employees. The good thing is that the withdrawal is now completely tax-free.”
Providing a big relief to the subscribers of National Pension Scheme (NPS), Finance Minister Nirmala Sitharaman in her maiden Budget on Friday announced that the Finance Bill will give effect to the cabinet decision of increasing the limit of exemption from current 40 percent to 60 percent of payment on final withdrawal from NPS.
The announcement brings NPS almost at par with the employee provident fund (EPF).
It also allows a deduction for the employer’s contribution up to 14 percent of salary from the current 10 percent, in case of the central government employees.
The bill also includes the decision of allowing deduction under section 80C for a contribution made to Tier II NPS account by central government employees.
However, Sandip Shrikhande, CEO, Kotak Mahindra Pension Fund , said ``From a NPS point of view, the budget has proved to be a bit of a dampener. 14 per cent limit is applicable only to the Central Government's contributions to its employee's account. Similarly, 80C exemption on Tier II contributions is available only to Central Government employees. The good thing is that the withdrawal is now completely tax-free.”
Karthik Srinivasan,senior vice president and group head - Financial Sector Ratings, ICRA Ltd said, ``The importance and focus on the National Pension Scheme by GOI, is evident with the separation of NPS trust from the PFRDA structure.
Last year, the Union Cabinet had announced that 60 percent of the withdrawal from national pension scheme (NPS) will be tax-free in the hands of the investor. Since the remaining money is used to purchase annuity it was a case of making withdrawal almost tax free.
However, this decision was not notified. The finance bill presented in Lok Sabha when passed will make NPS a much better tool to plan for retirement.
Each year individual investors can enjoy a tax break by investing up to Rs 50,000 in NPS under section 80CCD. The NPS lets individuals invest in equities, government securities and corporate bonds. The low cost of management charged by way of a low expense ratio of 0.1 percent makes it even more attractive. NPS along with traditional investment options such as EPF can help an individual build a large corpus for retirement.
Sitharaman also announced pension benefits for retail traders.This pension benefit shall be extended to three crore retail market traders and small shopkeepers with an annual turnover of less than Rs 1.5 crore under the Pradhan Mantri Laghu Vyapaari Mann-Dhan Yojana (PMLVMY). A monthly pension of Rs 3,000 will be provided to traders and shopkeepers over the age of 60 years.
Sitharaman clarified that the enrollment process shall only require a bank account and Aadhaar, with remaining information being self-declared.
This retail traders' pension scheme is in the loop of the Pradhan Mantri Shram Yogi Maandhan Yojana (PM-SYM). It was announced by the Centre during the Interim Budget for workers of the unorganised and organised sector having a monthly income of Rs 15,000 or less.
The PMLVMY is based on a 50:50 contributory basis, where partial payment shall be made by the recipient trader and the other half by the Centre.