Anil ChopraBajaj Capital
National Pension System (NPS) has emerged as a very popular option amongst Indian taxpayers, particularly after April 1, 2015 as Section 80CCD was introduced in the last Budget to give additional tax break to subscribers.
NPS was launched by PFRDA in the year 2004 for Central and State Government Employees only and subsequently in the year 2009 the same was made open for general public also. However, the scheme was unable to attract the masses at that time. Post Budget 2015 announcements, NPS has become much sought after investment option as a taxpayer can save additional tax of up to Rs.15,000/- by opening an NPS account and investing Rs.50,000/- in the scheme provided he is in 30% tax bracket.
Recently, Rules relating to early exit and premature withdrawal have been changed to bring in more discipline amongst investors in NPS. Earlier, subscribers could exit the scheme any time without any initial lock-in period and also they were allowed to withdraw up to 20% of the corpus at the time of exit. It was being noticed that several subscribers were exiting the scheme and thereby not waiting to get the full advantage of long-term growth and higher pension after the age of 60.
To bring discipline in investors' behaviour, rules for exit and withdrawal have now been amended. As per new Rules, subscribers cannot exit before the expiry of 10 years from the date of opening NPS account and they can only withdraw 20% of the corpus & remaining 80% will come in form of annuity, before reaching the vesting age of 60 years. Also, subscriber has given option of partial withdrawal upto 25% of total contributions made anytime after completing 10 years and continue the NPS account further.
This change will bring much more discipline amongst subscribers as only serious and long-term investors who have a long-term horizon and a goal of earning decent pension amount after retirement will be considering opening an NPS account now.
This is a positive move which should be welcomed by all as same is for the long-term benefit of citizens as well as Pension Fund Managers.
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