Please explain the tax liability on 25 per cent partial withdrawal allowed in National Pension Scheme (NPS) under special circumstances?
- Nitin Gupta
You can withdraw up to 25 per cent of your contributions to National Pension Scheme (NPS) for a few listed expenses after 10 years.The point to note is that the 25 per cent limit of withdrawal will be calculated on your contribution ad not on the account balance. Also, you can withdraw only for specified needs like children's higher education or marriage (including that of a legally adopted child), construction and purchase of the first house, treatment of 13 critical illness for self, spouse, children or dependent parents. You can only make three withdrawals, with a gap of five years between each. This gap, however, is not applicable for critical illnesses. As far as tax liability on this partial withdrawal is concerned, the new rules are silent on taxation of these partial withdrawals. However, according to an official the withdrawal is most likely be added to the income and taxed as per the slab applicable to the individual in the year of withdrawal.
This article was originally published on March 14, 2016.
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