Budget 2017, in a bid to provide further impetus to the National Pension System (NPS), has introduced the following provisions:
Tax-exemption on partial withdrawal from NPS
Currently, payment from National Pension System (NPS) to a subscriber on closure of his /her account or on his/her opting out is exempt up to 40% of the total corpus at the time of withdrawal .
The amount utilised for purchase of annuity will also get tax exemption. In fact, at the time of a normal exit, 40% of the total corpus is mandatorily required to be purchased for annuity.
In order to provide further relief to NPS subscribers, budget 2017 has proposed an exemption on partial withdrawal not exceeding 25% of the contribution made by an employee in accordance with the terms and conditions specified under Pension Fund Regulatory and Development Authority Act, 2013.
This benefit will be effective on partial withdrawal made by the subscriber after April 1, 2017.
Doubling of tax relief for the self-employed
Also, the budget announced that a contribution of up to 20% of the gross income of a self-employed individual (Individual other than the salaried class) can be deducted from the taxable income under Section 80CCD (1) of the Income Tax Act, 1961, as against 10% earlier.
The aim of the move is to ensure similar benefits for salaried employees and the self-employed.This benefit too will be available on contribution made by the self employed on or after April 1, 2017.
The additional tax deduction on investment up to Rs 50000/- under Section 80CCD (1B) stays the same for all NPS subscribers - salaried or self-employed.