Budget 2019: Amendments In NPS To Delight Pensioners – Outlook Money

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  • Last Updated on 28 October, 2020
July 11, 2019
Dipen Mittal, Manager at Taxmann.com in a conversation with Himali Patel of Outlook Money explains the tax treatment that pensioners would start receiving post the new amendement of NPS made in the Union Budget 2019. Excerpts from an interview.
 
 

Q1. In Budget 2019, finance minister Nirmala Sitharaman proposed to increase the income tax exemption limit on withdrawal from National Pension System (NPS) to 60%, from the existing 40%. How this would impact a regular pensioner?
National Pension System (NPS) is a voluntary retirement savings scheme wherein a person contributes certain amount in a NPS account during his work-life, which later enables him to draw a pension at the time of retirement. As per the scheme, the person is allowed to withdraw 60% of total savings as a lump sum at the time of retirement and the balance 40%is required to be used to purchase an annuity scheme from a life insurance company to get monthly pension for the rest of life.
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Finance Bill 2019
Though as per the scheme, a person can withdraw up to 60% of the total corpus, but Income Tax Act allowed an exemption up to 40% of the same. Now, the Government has made an amendment under Income-tax Act whereby, the exemption limit has been increased from 40% to 60% and it is brought in symmetry with the NPS scheme. Thus, the total amount withdrawn from NPS shall be completely tax-free for pensioners.

 

 

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