Union Budget 2017-18 to include more incentives for NPS subscribers
New Delhi [India], Feb. 2 : Aiming to provide further incentives to the National Pension System (NPS) subscribers, new provisions were introduced in the Finance Bill 2017 in Parliament on Thursday.
The existing provision of Section 10 (12A)of the Income Tax Act, 1961, provides that payment from NPS to a subscriber on closure of his account or opting out shall be exempt up to 40 percent of total corpus at the time of withdrawal .
The amount utilised for purchase of annuity is also tax exempt. At the time of normal exit, 40 percent of the total corpus is mandatorily required to be purchased for annuity. The subscriber has the option to use higher amount for purchase of annuity.
In order to provide further relief to the NPS subscribers, it has been proposed to insert a new clause (12B) in Section 10 of the Income Tax Act, 1961, to provide exemption on partial withdrawal not exceeding 25 percent of the contribution made by an employee in accordance with the terms and conditions specified under Pension Fund Regulatory and Development Authority Act, 2013, and regulations made there under. This benefit will be effective on partial withdrawal made by the subscriber after April 1, 2017.
Further, contribution up to 20 percent of the Gross Income of the self-employed individual (other than salaried class) will be deductible from the taxable income under Section 80CCD (1) of the Income Tax Act, 1961, as against 10 percent earlier.
This is with a view to provide parity between a salaried employee and a self-employed. This benefit will be available on contribution made by the self employed persons on or after April 1, 2017. This increased limit for tax benefit will help the self-employed individuals to save taxes on higher contribution in the NPS and thereby properly plan for their old age income security.
Additional tax deduction on investment up to Rs. 50, 000 under Section 80CCD (1B) will continue to remain the same for all NPS subscribers whether salaried or self-employed. (ANI)