A provision introduced in the Finance Bill, 2017 will allow individuals to withdraw upto 25 percent of their contribution to the National Pension System without attracting tax, the Pension Fund Regulatory and Development Authority (PFRDA) said in a media statement on Wednesday.
The benefit will be applicable on partial withdrawals made by subscribers after April 1 this year, the pension fund regulator said.
Prior to the introduction of this provision, individuals could only opt out of the scheme, or receive funds on closure of the scheme.
This is positive in that you could not withdraw money from the scheme without opting out of it, so it will introduce an element of liquidity.Kartik Jhaveri, Certified Financial Planner, Transcend Consulting
As per existing norms, upon opting out or closure of the scheme, at least 40 percent of the total corpus must mandatorily be invested to purchase annuity. The subscriber must pay tax on the amount not invested in this regard.
“It is important to note that the partial withdrawal is only applicable on the subscriber's own contribution to the scheme, and not to the entire corpus,” said Jhaveri.
Another provision allows self-employed individuals to claim higher deductions from taxable income for contributions to the National Pension System. Now, these individuals can claim deductions of up to 20 percent of their gross income as opposed to 10 percent earlier.
Also Read: Budget 2017: Much Ado About Nothing?
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