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Has mandatory annuity rule in NPS gone?

As per the budget proposal, an individual can withdraw 40 per cent of the corpus in National Pension Scheme (NPS) tax-free at the time of retirement

In the clarification about changes made in the tax treatment for Recognised Provident Fund & National Pension System (NPS) by Press Information Bureau, the point three says it is expected that the employees of private companies will place the remaining 60 of the corpus in annuity. When this 60 of the remaining Corpus is invested in Annuity, no tax is chargeable. So what it means is that the entire corpus will be tax free if invested in annuity. Now, the use of words like "expected" in the first line and the use of "if invested in annuity" gives the impression that the purchase of annuity from 40 per cent of the corpus in NPS has been changed or made optional, provided the subscriber is ready to pay tax on the 60 corpus as per his tax slab. Is my reading correct?
- Anish Mohan

Your reading is wrong. As per the budget proposal, an individual can withdraw 40 per cent of the corpus in National Pension Scheme (NPS) tax-free at the time of retirement. The budget has not done away with the mandatory provision of using a minimum 40 per cent of the corpus to buy an annuity. It sill exists. Earlier, the individual had the option to use minimum 40 per cent of the corpus to buy an annuity and withdraw 60 per cent of the corpus at the time of retirement, but the withdrawal was taxed as per the Income Tax slab applicable to the individual. Now, he can withdraw 40 per cent of corps tax-free. This is the only change proposed in the budget regarding NPS. The individual always had the option to use the entire corpus to buy an annuity if she wanted to escape paying taxes at the time of retirement. Now, such an individual just need to use 60 per cent of the corpus to buy annuity to escape tax, as the government is giving her the option to withdraw 40 per cent of the corpus tax-free.

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