I am a private sector employee and I am contributing to National Pension Scheme (NPS). There is no employer contribution to it. If I use 100 per cent of the corpus to by an annuity on retirement, will the capital gains be taxed?
- Ankur Vishal Malik
On retirement at 60, you have the option to withdraw 40 per cent of the corpus in National Pension Scheme (NPS) tax-free. You must use a minimum 40 per cent of the corpus to buy an annuity. You can withdraw the remaining 20 per cent of the corpus, but you will have to pay tax on it. If you want to avoid paying income tax at the time of withdrawal, you can use 60 per cent of the corpus (or 100 per cent as you suggested) to buy an annuity from a life insurance company. However, the annuity income would be added to your income and taxed as per the income tax slab applicable to you.