I am 54 years old. I will retire in 2020 which is five years from now. Can I opt for National Pension Scheme (NPS)? If I understand correctly it will save me ₹15,000 per year for five years. It is ₹75,000 and the corpus could also grow. My query is can I withdraw the entire money in 2020? Does NPS come under Exempt, Exempt, Exempt (EEE)? If no, what are the tax implications?
- Girish Vyas
An individual between 18 and 60 years can join National Pension Scheme (NPS). If you are planning to invest for the extra tax deduction, you can contribute up to ₹50,000 and claim the extra deduction under Section 80CCD(1B) of the Income Tax Act. You cannot withdraw the entire accumulated money in NPS after five years. At 60, you must use at least 40 per cent of the accumulated corpus to buy an annuity from a life insurance company. You can withdraw the rest of the money in a lumpsum. NPS comes under Exempt, Exempt, Tax (EET) and the money is taxed at the time of withdrawal. The withdrawal amount is added to your income and taxed according to the Income Tax slab applicable to you. The annuity income will also be taxed as per the Income Tax slab applicable to you.
This article was originally published on February 11, 2016.
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