News Social Sector

NATIONAL PENSION SYSTEM (NPS)

Written by Talent KAS

Why in News?

According to a notification by the Department of Economic Affairs on Foreign Exchange Management (Non-debt Instruments) Rules, 2019, the OCIs were permitted to subscribe to the NPS.

News in Detail

  • Pension Fund Regulatory and Development Authority (PFRDA) has permitted Overseas Citizen of India (OCI) to enrol in NPS at par with non-resident Indians (NRIs).
  • However, the option of NPS Tier-II account will not be available for both NRI and OCI subscribers.
  • OCI willing to subscribe NPS should be eligible to invest as per the provisions of the PFRDA Act and the annuity/accumulated saving will be repatriable, subject to FEMA (Foreign Exchange Management Act) guidelines.

What is NPS?

  • The NPS is a government run pension and investment scheme aimed at providing old age security through safe and regulated market-based return.
  • It is regulated by PFRDA and allows its subscribers to contribute regularly during their working life.
  • To invest in NPS scheme, it is mandatory for the subscriber to open Tier-I account. On the other hand, Tier-II account is optional.
  • The subscribers at the time of retirement can withdraw the money in the form of lump sum withdrawal or annuity payments.
  • With the latest addition, any Indian citizen, resident or non-resident and OCIs are eligible to join NPS till the age of 65 years.

Tax benefits

  • The contributions made towards the NPS are eligible for an additional tax deduction under section 80CCD (1B) up to ₹50,000 which is over and above the ₹1,50,000 limit of deduction available under section 80CCD (1).
  • In the Union Budget 2019, the tax exemption limit for lumpsum withdrawal on exit/maturity from the NPS has been increased from the present 40 per cent to 60 per cent under section 10 (12A) of the IT Act.
  • The remaining 40 per cent of the corpus is already tax-exempt as it is mandatorily utilised for annuity purchase.

[Source: The Hindu, Economic Times]

 

About the author

Talent KAS