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4 Changes Made In NPS In the Union Budget 2016


With an aim to encourage more number of private sector employees to have a pension security after retirement strict rules are made so that individuals should not withdraw the entire money from the Provident Fund Account.


The National Pension System (NPS) is a pension scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA).

4 Changes Made In NPS In the Union Budget 2016

Individuals considering NPS should invest money at regular intervals into your pension account and also there is an option of taking a part of the corpus as lump sum amount and the balance in the form of fixed monthly income.

In the Union Budget 2015-16, the finance minister announced additional tax benefit of Rs 50,000 if you park money in the scheme, which is now a part of Sec 80CCD.

Here are 4 changes made inNPS

1. The Government has announced that forty percent of the total corpus withdrawn at the time of retirement will be tax exempt both under recognised Provident Fund and NPS.

2. It is expected that the employees of private companies will place the remaining 60% of the Corpus in Annuity, out of which they can get regular pension.


3. When this 60% of the remaining Corpus is invested in Annuity no tax is chargeable. So what it means is that the entire corpus will be tax free, if invested in annuity.

4. The Government in this Budget has also made another change which says that when the person investing in Annuity dies and when the original Corpus goes in the hands of his heirs, then again there will be no tax.

These mechanism will help individuals to invest in pension products rather than withdraw and use the entire Corpus after retirement.

Read more about: nps union budget 2016
Story first published: Wednesday, March 2, 2016, 11:58 [IST]
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