§
The new pension system is based on defined contributions. It
uses the existing network of bank branches, post offices etc to collect
contributions. There is seamless transfer of accumulations in case of change of
employment and/or location. It also offers a basket of investment choices and
Fund Managers. The new pension system is voluntary.
§
Individuals can normally exit at or after age 60 years
from the pension system. At exit, the individual would be required to invest at
least 40 percent of pension wealth to purchase an annuity. In case of
Government employees, the annuity should provide pension for the lifetime of
the employee, his dependent parents and spouse at the time of retirement.
The individual would receive a lump-sum of the remaining pension wealth, which
he would be free to utilize. Individuals would have the flexibility to leave
the pension system prior to age 60. However, in this case, the mandatory
annuitisation would be 80% of the pension wealth.
§
The participating entities (PFMs, CRA etc.)
would give out easily understood information about past performance &
regular NAVs, so that the individual would be able to make informed choices
from the schemes.
§
NPS
account can be
operated from anywhere in the country irrespective of employment and geography.
§ Subscribers can
shift within the sector and from one sector to another.
§
NPS is covered under the Income Tax Act, 1961 for tax
benefits.
§ Currently NPS has
'Exempt-Exempt-Taxation' (EET) where
o
Investment up to 1 Lakh in Tier I account is
exempted
o Withdrawal are
subject to tax
§ As per the
Proposed Direct Tax Code (DTC), NPS will have Exempt-Exempt-Exempt (EEE) status
o All investments
(Up to Rs.1 Lakh) made under Tier I account under NPS are exempted
o No tax at the time
of withdrawal
§ There is no
exemption on Investments made under Tier II account.
No comments:
Post a Comment