Five new NPS rules you should be aware of
The government in the recent Budget announced several changes to the National Pension Scheme (NPS), including increasing the income tax exemption limit on withdrawal from the pension scheme. The government also announced some additional benefits exclusively for central government employees who contribute to the pension scheme. NPS Trust will restart recovery of administrative charges from the assets under management of subscribers. NPS Trust is responsible for the monitoring of the operational and service level functions under NPS or any other pension scheme regulated under the PFRDA Act.
Recent changes in NPS rules
1) The charges for NPS subscribers have increased marginally after NPS Trust also allowed recovery of administrative charges/expenses @0.005% per annum. “It is brought to the notice of all subscribers under National Pension System that, as approved by the Pension Fund Regulatory and Development Authority, NPS Trust will restart recovering administrative charges/expenses @0.005% per annum of the Asset under Management (AUM) on daily accrual basis to meet its expenditure," NPS Trust said in a notice to subscribers. This came into effect from 1 August, 2019.
2) In Budget, which was tabled in July and later approved by the Parliament, the government had raised the income tax exemption limit on withdrawal from NPS corpus on retirement, or reaching the age of 60, to 60% from 40%.
On retirement, an NPS subscriber can withdraw a lumpsum of up to 60% of the NPS corpus fund and balance 40% has to be invested in an annuity plan. This makes NPS an Exempt, Exempt and Exempt (EEE) product like Public Provident Fund and Sukanya Samriddhi Yojana though only 60% of the corpus can be withdrawn.
4) The government has also allowed own contribution by central government employees to Tier II account qualify for income tax benefits under Section 80C, provided the money is locked in for a period of 3 years.
5) Earlier this year, pension fund regulator PFRDA gave government sector NPS subscribers more choice in terms of selecting fund managers to manage their NPS contributions. Central Government subscribers have been allowed to choose any one of the pension funds including private sector pension fund manager. Government employees have the freedom to choose asset allocations, allowing more equity exposure. Earlier it was capped at 15%.
Source : Live Mint