Tax on Conversion of NPS Balance into Annuity

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  1. sahil sood

    sahil sood New Member

    sir If a person has receievd the amount of contribution made in NPS on maturity or surrender of Policy whatever the case may be and out of which partial amount say (50%) is used by him for purchasing annuity plan. what is the treatment of the remaining amount ? whether the whole amount wil be exempt or the remaining (50%) will be taxable upto 60% ???
     
  2. V K Khanna

    V K Khanna Active Member

    Under the existing provision of the Income Tax Act, tax treatment for the NPS referred to in Sec 80 CCD is EET which means that the terminal benefits on exit or superannuation in the form of lumpsum withdrawal, are taxable in the hands of individual subscriber or his nominee, in the year of receipt of such amount.

    2. The Finance Bill, 2016 has proposed to amend Sec 80CCD so as to provide that any payment from NPS Trust to an employee on account of closure or his opting out of pension scheme referred to in Sec 80 CCD to the extent it does not exceed 40% of the total amount payable to him at the time of closure or opting out of the scheme shall be exempt from tax. However, whole amount received by the nominee on death of the subscriber shall be exempt from tax. The amendment will take effect from 1.4.2017.
     
  3. sahil sood

    sahil sood New Member

    Ok thanks sir

    It means only 40% of the amount will be exempt in every condition (except in case of death) whether a person had purchased any annuity plan or not...!
     
    Last edited: Mar 14, 2016
  4. V K Khanna

    V K Khanna Active Member

    As on date, the whole amount is taxable.

    If the amendment proposed in Finance Bill 2016 is approved, only 40% of the whole amount received will be tax-free.
     
    Abhijit Guha likes this.
  5. sahil sood

    sahil sood New Member

    Thanks sir
    For your Precious time to Reply
     
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