New Tax Benefits For National Pension System Subscribers; Here Are The Details
2018 Union budget of India was the annual financial statement appropriation bill and finance bill of India and was presented to Parliament on this year on 1 February by Finance Minister Arun Jaitley.
The budget brought changes to various sectors and also offered few tax benefits to investors as well as NPS subscribers. This new proposal in Budget 2018 as promised, has brought non-salaried subscribers at par with salaried subscribers.
In the year 2018, during budget decision, the government announced new income tax benefits for subscribers with NPS (National Pension System). Here’s everything you need to know about it.
1. NPS offers two types of accounts: Tier I and Tier II. The former one is a non-withdrawable account from which subscriber cannot withdraw, not until he/she reaches the age of 60 years. On the other hand, the Tier-II account is like a savings account wherein subscribers are free to withdraw the money. However, to open a Tier II account only when he or she holds an active Tier I account.
2. The chairman of pension regulatory body PFRDA stated in one of his statement that the proposal of long-term capital gains tax presented during Union Budget 2018, won’t have an impact on NPS.
3. An NPS subscriber can only withdraw his or her Tier 1 account only once he/she meets the exit conditions as already prescribed under NPS.
4. The new long-term capital gains tax might not have an impact on Tier I accounts but it’ll definitely will have an impact on the Tier II account.
5) Under the new budget, NPS is offering their subscribers to realign their investments in equity, corporate bonds and government securities. NPS is also offering investors to choose different pension fund managers and investment options for their accounts.
6) ) Currently an employee contributing to the NPS is allowed an exemption of 40% of the total amount payable to him on closure of the account.The government has also proposed an extension of tax-free withdrawal from NPS to other non-employee subscribers.
7) “In order to provide a level playing field, it is proposed to amend clause (12A) of section 10 of the Act to extend the said benefit to all subscribers,” according to the Finance Bill, 2018. The extension of tax-free withdrawal to non-employee subscribers will be available from the financial year 2018-19.
In budget 2018, Finance Minister Arun Jaitley also aimed at reducing distress in the agricultural sector and promised to create more jobs in rural as well as in urban economies, so it can further boost the growth of the economy.