Can an NPS subscriber use 100 per cent of the corpus to buy an annuity to avoid paying tax. Is this allowed?
- Meenu Chadha
Yes, you can use the entire corpus you have accumulated in National Pension System (NPS) to buy an annuity. However, this method of avoiding paying tax comes with its own set of problems. One, annuity rates are really low in India. That means you will have to really settle for very low rates on your corpus. Two, the annuity rate is fixed when you buy an annuity of your choice. That means your income will remain constant even when the inflation and interest rates go up. Lastly, annuity income is taxed. That means you are not really avoiding paying tax on your corpus.
This article was originally published on December 18, 2015.
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