Earlier under the NPS, 40% of the corpus had to be mandatorily converted into annuity scheme and 60% would have been taxed. Now 40% will still be converted into an annuity , 40% can be withdrawn tax free and a tax will have to be paid on the remaining 20% –this is better than earlier.
But why force NPS –subscribers into this sub-optimal plan? Right now they earn 10-11%, while with annuities, they will earn 6-7%which is the current rate for an annuity.
SOURCE;`The Financial Express, New Delhi,March 9, 2016, page 8