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Nps withdrawal on superannuation

Ravindra (Proprietor) (30 Points)

12 September 2019

After attaining the age of 60 years now I am retired and I have NPS account from my previous employer. Now that I am eligible for withdrawal of upto 60% of the accumulated amount my query is

With the latest amendment in the Finance Bill making the entire 60% withdrawal Free from Income Tax wef from 01.04.2020. In the meantime the existing provision permits us to withdraw 40% without any tax.

Can I withdraw 40% now as it is tax free for the current Financial Year and Next year can I withdraw balance 20% to take the benefit of amendment to make NPS withdrawal Totally tax free.

Thanks in advance

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4 Replies

Kapadia Pravin (17249 Points)
Replied 12 September 2019

Budget 2019 made lump sum withdrawal of 60% totally tax free at the time of maturity.

The balance 40% of the corpus would have to be compulsorily used to buy an annuity plan. The annuity received is Taxable in the year of receipt.

Ravindra (Proprietor) (30 Points)
Replied 12 September 2019

60% is totally tax free wef 1.04.2020. Whereas as of now till 31.03.2020 only 40% withdrawal is Tax free, balance 20% is taxable. My question was can I withdraw 40% now and balance 20% after 1.04.2020.

Kapadia Pravin (17249 Points)
Replied 12 September 2019

It's not that way sir,
60% amendment is already effective for FY 2019-2020 from 1-9-2019.

What you are writing wef 1-4-2000 means that date refers to AY 2020-2021

Ravindra (Proprietor) (30 Points)
Replied 13 September 2019

Thanks for the quick response. Kindly refer the extract of the Finance Bill 2019 passed by Parliament. I am quoting the relevant extract. Please clarify with respect to this amendment.

Further, clause (12A) of the said section provides that any payment from the National Pension System Trust to an employee on closure of his account or on his opting out of the pension scheme referred to in section 80CCD, to the extent it does not exceed forty per cent. of the total amount payable to him at the time of such closure or his opting out of the scheme, shall be exempt from tax.

It is proposed to amend the said section so as to increase the said tax exempt amount from forty per cent. to sixty per cent.

These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020- 2021 and subsequent assessment years. "