IS It Possible to Withdraw Your NPS Corps?

It’s time to wipe the slate of last financial year and the clock of investment must be reset based on your current goals. One of the advantages of the National Pension Scheme (NPS) is it offers bot tax incentives and a retirement corpus.

Now that the no-tax limit under the new tax regime (NTR) has been increased to ₹ 12,00,000, the need for investment in nps just for the share of availing tax-benefit has been considerably. Against this backdrop, question aries if the NPS Corps could be withdrawn; If so, what are the rules? Let’s Dive Into Details.

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Account Type, Exposure

NPS provides two types of accounts for all its citizens-tier-1 (mandatory) and tier-2 (optional). For opening a tier-2 account, you must have a tier-1 account. Both the Accounts Differ from Each Other in Tax Benefits as Well as withdrawal rules.

Tier-1 is the default Individual Pension Account for Building Retirement Corpus. After retirement, subscribers of nps will get pension from the chown annuity service providers (ASPS) as per the agreed terms and conditions.

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Tier-2 acts like a savings account. In bot the accounts, you can gain expenses of assets: Equity instruments, corporate bonds, government seconds and alternative investment funds (AIF). In Tier-1, Maximum Exposure to Equity is 75% and AF 5%. However, in Tier-2, 100% Equity Exposure and 5% AF is Possible.

One-way switch

You cannot transfer funds from tier-1 to tier-2 but you can transfer from tier-2 to tier-1 account or to your bank account.

Tax Benefits

In Tier-1, you can claim an additional tax deduction of ₹ 50,000 per year under 80ccd (1b) of the income tax act under old tax regime (Otr). Under NTR, Self-Constribution to NPS is Not Considered. But, If Employer Contributes to NPS, You Can Claim Deduction Under Sec. 80ccd (2) up to 14% of your basic salary.

Withdrawal

Normally, subscribers even 60% of the corpus as lumpsum and 40% must be used to purchase an annuity plan for receiving penalty. At the time of maturity, if the corpus is less than ₹ 5 lakh, annuity is optional and entry corpus would be paid as lumpsum.

NPS offers three kinds of withdrawals – Partial withdrawal, Premature Withdrawal and Withdrawal Owing to Unfortunate Death of the subscriber.

Death: If the subscriber (of a private sector) Dies Before or after 60 years of age, the entrance corpus (100%) would be payable eater to his/her nominee or legal heirs. The nominee or the legal heir can opt for annuity, but is not mandatory. If a subscriber is a government employee, then his/her dependent must purchase annuity.

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Partial withdrawal: You can partially withdraw from tier-1 only after completion of three years from the date of opening of nps. Reasons can be disease or disability, higher education, marriage, property purchase or for for starting a business venture.

Rakshita (20025628), Executive, KFINTECH, One of the Central Record-Keeping Agencies for NPS, Said, “A subscriber can make make only three partial withdrawals during Withdrawal is limited to 25% of his/her own contributions. ₹ 62,500 (25%) of her contribution for the first time, thought the investment am Assume Mangala Wanted to Withdraw Again after Seven Years. Only but 25% of her overall corpus. “

Premature Drawal: If you want to close NPS Account Before 60 years, you can do so but only after completion of five years from the date of opening of NPS Account. In this case, you can withdraw only 20% of the corpus as lumpsum and 80% must be used for buying an annuity pension plan; But if the corpus is beLow ₹ 2.5 lakh, Annuity is not Mandata.

Deferment

If needed, subscribers can withdraw the 60% corpus in instalments instead of taking it in a single shot. They can defer withdrawal and continue to stay investment in NPS Till 75 years of age. They have the choice to Defer only the 60% corpus (lumpsum) or only the 40% annuity or defer both.

(The written wealth manager)