Skip to main
Five new NPS rules you should be aware
- The charges for NPS subscribers have increased marginally after NPS Trust also allowed recovery of administrative charges/expenses @0.005% per annum. “It is brought to the notice of all subscribers under National Pension System that, as approved by the Pension Fund Regulatory and Development Authority, NPS Trust will restart recovering administrative charges/expenses @0.005% per annum of the Asset under Management (AUM) on daily accrual basis to meet its expenditure," NPS Trust said in a notice to subscribers. This came into effect from 1 August 2019.
From January this year, NPS Trust had stopped recovery of administrative charges/expenses that it used to charge @0.005% per annum of AUM on a daily accrual basis to meet its expenses. The impact of the reimposition of @0.005% will have only a minimal impact, say experts. On an AUM of ₹1 lakh, the new charge means that only ₹5 in extra charges will be deducted per year.
- In Budget, which was tabled in July and later approved by the Parliament, the government had raised the income tax exemption limit on withdrawal from NPS corpus on retirement or reaching the age of 60, to 60% from 40%.
On retirement, an NPS subscriber can withdraw a lump sum of up to 60% of the NPS corpus fund and balance 40% has to be invested in an annuity plan. This makes NPS an Exempt, Exempt, and Exempt (EEE) product like Public Provident Fund and Sukanya Samriddhi Yojana though only 60% of the corpus can be withdrawn.
- For central government employees, Section 80CCD(2) of the Income Tax Act has been amended to allow exemption of employer contribution up to 14% of the salary of central government employees. This move benefits approximately 18 lakh central government employees covered under NPS. This is not applicable to private-sector employees.
- The government has also allowed own contribution by central government employees to Tier-II account qualify for income tax benefits under Section 80C, provided the money is locked in for a period of 3 years.
- Earlier this year, pension fund regulator PFRDA gave government sector NPS subscribers more choice in terms of selecting fund managers to manage their NPS contributions. Central Government subscribers have been allowed to choose any one of the pension funds including private sector pension fund manager. Government employees have the freedom to choose asset allocations, allowing more equity exposure. Earlier it was capped at 15%.