Indian residents can expect many reforms in the upcoming Union Budget 2019, which will be announced by Finance Minister, Nirmala Sitharaman. Before going forward, it’s important to understand what NPS exactly means. NPS stands for National Pension Scheme and is basically a government investment instrument that aims to provide financial security for economically low-class families and requires a small amount to be invested every month. There are several reforms announced in the Union Budget 2018, which will take effect from April 1, 2019.
If you are an NPS subscriber, then there are some important things that you need to know. In 2018, Mr. Arun Jaitley announced a 40% tax exemption on total payable amount given to pension holders upon the closure of his/her account or while opting out. This has bridged the gap between tax benefits of salaried and non-salaried individuals. Previously this benefit was not provided to non-salaried people and will come into effect from April 2019. The provisions regarding this are listed in Section 10 clause 12(A) of the Income Tax Act.
Not only non-salaried individuals will be benefitted by these reforms, but also all other NPS subscribers. A list of five reliefs were announced in December 2018 ranging from contribution to tax exemption. Here are the four important reforms that will be enforced as per Union Budget 2019:
The good news is that the government’s contribution on an individual’s basic salary will increase from 10% to 12%. That being said, employees will continue to contribute 10% of their basic salary towards NPS.
The previous rule was amended so that government employees can now withdraw their lump sum amount upon maturity. Another good news is that government employees can withdraw up to 60% of their accumulated funds during the time of retirement; the previous being just 40%. If the employees decide on not withdrawing any part of the gathered fund in NPS, then their pension would exceed 50% of their last drawn salary.
NPS subscribers will be allowed to invest in either equities or fixed income options, which will help them diversify gains. If this seems too confusing, you can choose your own investment method at Finserv MARKETS.
New Tax Benefit
The cabinet has announced new tax incentives for employees’ contribution, which is up to 10% under Section 80C of the Income Tax Act.
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These reforms are bound to be beneficial and every NPS subscriber should capitalise on these opportunities. Now that we have discussed the above-mentioned benefits of ULIPs, select from the plans, Bajaj Allianz Goal Assure or Bajaj Allianz Future Gain, available on Finserv MARKETS, as per your financial needs.
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