NPS Rules: Old age passes through happiness and prosperity, so it is important that you have money in your pocket. This will happen only when you have a source of monthly income. Sometimes retirement planning gets too late.
But, now there is such a facility in the National Pension System that even at the age of 65 years, you can open a pension account. The Pension Fund Regulatory and Development Authority (PFRDA), which regulates NPS, has recently increased the age limit to join NPS. Now any person can open an NPS account till the age of 70 years. Earlier the age limit was 18-65 years. In such a situation, even after the age of 65, the benefits of opening an NPS account and the rules of exit, withdrawal should be known.
How much exposure to pension funds, asset allocation
According to the new rules of NPS, the maximum limit of equity exposure has been fixed for the subscriber joining NPS above 65 years of age. Under the auto choice option, you can have an equity exposure of a maximum of 15 percent in pension funds (PF) and asset allocation and a maximum of 50 percent in active choice. That is, maximum 50 percent of the fund can be invested in equities. Apart from this, such subscribers can change the asset allocation once in a year and twice in the pension fund.
Let us tell you, PFRDA has issued a circular on 26 August 2021 regarding the new rules. According to the new rules, now an Indian citizen, resident or non-resident and Overseas Citizen of India (OIC) can open an NPS account between the age of 65-70 years and can defer the account till the age of 75 years.
A Tier 2 account can also be opened by a subscriber who opens an NPS account after the age of 65 years. Under the National Pension System, two types of accounts can be opened Tier 1 and Tier 2. It consists of Tier 1 Pension Account and Tier 2 Voluntary Savings Account. Tier 1 account can be opened by any person but Tier-2 account can be opened only if you have Tier-1 account.
What are the new rules for exit and withdrawal
If you open an NPS account after 65 years of age, you can usually exit after 3 years. It is necessary to buy an annuity from at least 40 per cent of the corpus. The remaining amount can be withdrawn. However, if the entire corpus is Rs 5 lakh or less, then the entire amount can be withdrawn in lump sum. At the same time, you can exit before maturity i.e. even after completion of 3 years. In this case, it will be necessary to buy an annuity from at least 80 per cent of the corpus. You can withdraw the rest of the amount. However, if the entire corpus is Rs 2.5 lakh or less, then the entire amount can be withdrawn in lump sum. If the subscriber dies, his nominee will get the entire amount in one lump sum.
NPS: Extra benefit of tax exemption
Under NPS, under section 80CCD(1B) of the Income Tax Act, the benefit of tax exemption is available on investment up to Rs.50 thousand. NPS can also help you in extra tax savings if you have completed the limit up to Rs 1.5 lakh under section 80C. Withdrawal up to 60 percent of the amount on maturity of this plan is not taxed. Keep in mind, the tax exemption you get on contribution is available only on Tier-1 account.
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