The Budget 2016 and New Pension Scheme (NPS)

The popularity of this scheme has increased manifold. Currently, NPS has more than 1.5 crore subscribers with total asset under management of more than Rs1.09 lakh crore compared to a mere 67.11 lakh subscribers in 2014.

NPS is a flexible retirement savings scheme which offers both a lump-sum amount and monthly pension i.e. a fixed income to an employee after retirement.

The employee has various investment options available in NPS such as the percentage he wishes to invest in equity or debt. On resigning the employee can carry this account with him to the next place of employment. Employee’s contribution to NPS will be deductible up to 10%of salary subject to overall cap of Rs 1.5 lakh (which includes investments under Section 80 c). An additional deduction of Rs 50,000= is also available for any contribution made by employee to NPS. This additional amount of Rs 50,000= is over and above the overall cap of Rs 1.5 lakh under section 80 cce. Employer’s contribution will also be available for deduction up to 10% of salary (without any cap). Accruals from your NPS account are taxable only when you opt out / withdraw from the scheme or on maturity( at the age of 60).

From April 1, 2016 any payment from NPS Trust, on closure of account or on opting out is not taxable to the extent it does not exceed 40% of total amount payable. However, the whole amount received by the nominee on behalf of the account holder shall be exempt from tax.

The government has recently made it much easier to invest in NPS by introducing the eNPS- online subscriber registration and contribution facility. You can now contribute online via net banking or by using your credit or debit card.

source: The times of India, New Delhi, March 1, 2016, page no. 7