TAX ON NATIONAL PENSION SCHEME (NPS)

TAX ON NATIONAL PENSION SCHEME (NPS)

Press Information Bureau
Government of India
Ministry of Finance

11-April-2017 17:53 IST

TAX ON NPS

The provision that the withdrawal from National Pension Scheme is taxed to the extent of 60 per cent has been introduced into the Income Tax Act, 1961 (‘Act’) vide Finance Act, 2016 by inserting clause (12A) in Section 10 of the Act.

  Prior to Finance Act, 2016, National Pension Scheme (NPS), referred to in section 80CCD, was under Exempt, Exempt and Tax (EET) regime i.e., the monthly/periodic contributions during the pension accumulation phase were allowed as deduction from income for tax purposes; the returns generated on these contributions during the accumulation phase were also exempt from tax but the terminal benefits on exit or superannuation, in the form of lump sum withdrawals, were taxable in the hands of the individual subscribed or his nominee in the year of receipt of such amounts unlike PPF and EPF which have been enjoying EEE regime i.e. Exempt, Exempt, Exempt.

 In order to rationalize the taxability of receipts from pension plans, vide Finance Act, 2016, section 10 of the Act was amended to provide that any payment from National Pension Scheme to an employee on account of closure or his opting out of the NPS shall also be exempt from tax, to the extent it does not exceed forty percent of the total amount payable to him at the time of closure or his opting out of the scheme. Further, Finance Act, 2017 has amended section 10 of the Income-tax Act to exempt partial withdrawals by employees (to the extent of 25% of the employee’s contribution) from their NPS accounts in accordance with the guidelines prescribed under Pension Fund Regulatory and Development Authority Act, 2013.

 This was stated by Shri Santosh Kumar Gangwar, Minister of State in the Ministry of Finance in written reply to a question in Rajya Sabha today.

DSM/KA (Release ID :160883)  Min. of Finance 11.04.2017)

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No Documentary Proof For GPF Advance, Withdrawal: Govt

New Delhi: No documentary proof is required for getting advance or withdrawal from General Provident Fund (GPF), Union Minister Jitendra Singh today said.

“No documentary proof is required to be submitted now for GPF advance and withdrawal,” the Minister of State for Personnel, Public Grievances and Pensions Jitendra Singh said in a written reply to Lok Sabha.

The government has with effect from March 7, 2017, simplified and liberalised the conditions for taking advance from the fund for education, illness and purchase of consumer durables.

“Conditions and procedures for withdrawal from the fund for the purpose of education, illness, housing, purchase of motor vehicles etc. have also been liberalised.

“No documentary proof is required to be submitted now for advance and withdrawal applications. A simple declaration by the subscriber is sufficient,” the minister said in a written reply to Lok Sabha.

A time limit for sanction and payment of advance or withdrawal has also been fixed, said Singh, the Minister of State for Personnel.

He said there is no proposal under consideration of the government to increase/link the rate of interest on GPF at parity with that of Employees’ Provident Fund (EPF).

“The interest rates on EPF are decided on the recommendations of the Central Board of Trustees taking into account the yearly income from the investment made by EPFO.

The GPF interest rate is presently fixed at par with that of PPF interest rate,” said Singh.

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