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Tag: National Pension Scheme

  • NPS guidelines modified: Entry age elevated, exit norms revised. Details right here

    In an enormous aid to pension subscribers in National Pension Scheme (NPS), the Pension Fund Regulatory and Development Authority (PFRDA) has revised the foundations for these becoming a member of it after 65 years of age. In a set of recent guidelines, PFRDA has permitted them to allocate as much as 50% of the funds in fairness, moreover easing the exit norms.

    The pension fund has revised the rules on entry and exit following a rise within the most age for becoming a member of the NPS from 65 years to 70 years of age. The entry age for NPS has been revised to 18-70 years from 18-65 years.

    Any Indian citizen and Overseas Citizen of India (OCI) within the age group of 65-70 years also can be part of NPS and proceed as much as the age of 75 years, in accordance with a PFRDA round on the revised pointers.

    “Those subscribers who’ve closed their NPS accounts have additionally been permitted to open a brand new account as per elevated age eligibility norms,” PFRDA stated in a press release. 

    The most fairness publicity, nevertheless, will likely be solely 15%, if subscribers becoming a member of NPS past the age of 65 years determine to speculate beneath the default ‘Auto Choice’.

    “The subscriber, joining NPS beyond the age of 65 years, can exercise the choice of PF (pension fund) and asset allocation with the maximum equity exposure of 15 per cent and 50 per cent under Auto and Active Choice, respectively,” it additional added.  

    View Full PictureThe funding choices for NPS subscribers  (PFRDA )

    An NPS subscriber has the liberty to allocate his/her contributions to completely different asset courses by means of ‘Active Choice’ or ‘Auto Choice’. Under ‘Active Choice’, a subscriber has extra say on allocation of funds throughout asset courses, whereas in ‘Auto Choice’ the funds will get invested in pre-determined proportion as per the age of the subscribers.

    The contributions of subscribers are invested by the PFs (chosen by subscribers) in compliance with the funding pointers for every asset class — fairness, company bonds, authorities securities and alternate belongings.

    Subscribers becoming a member of the social safety scheme past the age of 65 years can allocate solely 5 per cent of the funds to alternate belongings beneath ‘Active Choice’. This asset class isn’t accessible beneath the ‘Auto Choice’ possibility.

    The PF could be modified as soon as per 12 months, whereas the asset allocation could be modified twice.

    On the exit circumstances for subscribers becoming a member of NPS past the age of 65 years, the round stated “normal exit shall be after 3 years”.

    “The subscriber will be required to utilise at least 40 per cent of the corpus for purchase of annuity and the remaining amount can be withdrawn as lump sum,” it stated.

    View Full ImageExit possibility for NPS subscribers  (PFRDA )

    However, if the corpus is the same as or lower than ₹5 lakh, the subscriber might choose to withdraw all the accrued pension wealth in lump sum, it stated.

    The PFRDA additional stated exit earlier than the completion of three years will likely be handled as ‘untimely exit’. Under untimely exit, the “subscriber is required to utilise at least 80% of the corpus for purchase of annuity and the remaining can be withdrawn in lump sum”.

    In the case of untimely exit, if the corpus is lower than ₹2.5 lakh, the subscriber might choose to withdraw all the accrued quantity in a single go.

    The PFRDA additional stated that in case of loss of life of the subscriber, all the corpus will likely be paid to the nominee as lump sum.

    Other NPS subscribers having a specified corpus on the time of retirement or attaining the age of 60 years want to purchase an annuity, provided by insurance coverage corporations, on a compulsory foundation.

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  • NPS withdrawal: How the brand new Re 1 ‘penny drop’ function works

    A small quantity will likely be credited to the financial savings account of the NPS subscriber for immediate verification of the checking account

  • Should you put money into PPF or enhance contribution by way of VPF?

    NEW DELHI :
    If you’re looking at government-backed retirement schemes, you’ve 4 choices. Employees’ provident fund (EPF) and voluntary provident fund (VPF) can be found to the salaried class. National Pension Scheme (NPS) and Public Provident Fund (PPF) are open to all.

    Of the three schemes, NPS is market-linked—the returns are primarily based on the efficiency of the underlying investments. The different three schemes carry a set rate of interest.

    Typically, staff use a mix of EPF and PPF. But as an alternative of investing in PPF, salaried individuals can enhance their contribution to EPF (by choosing VPF). In the current previous, EPF has supplied greater curiosity returns than PPF.

    Let us check out the distinction between PPF and EPF that may aid you resolve whether or not you need to go for PPF or enhance the EPF contribution.

    You can contribute to PPF by opening an account with a financial institution. The rate of interest supplied on PPF may change each quarter. At current, it’s 7.1%. The minimal contribution for PPF is ₹500, and the utmost is ₹1.5 lakh a 12 months.

    In EPF, the worker can contribute 10% or 12% of the essential wage, and the employer matches it. If your fundamental wage is, say, ₹30,000, you and your employer can contribute as much as ₹3,600 every month (complete of ₹7,200).

    While the employer contribution is restricted at 12% most, an worker can enhance his or her contribution by way of VPF.

    The rate of interest on EPF is said after the completion of the monetary 12 months. For instance, for the contributions made within the monetary 12 months 2020-21, the speed shall be declared within the present monetary 12 months.

    According to experiences, the Central Board of Trustees of Employees’ Provident Fund Organization (EPFO) has really helpful 8.5% curiosity for the earlier monetary 12 months. The authorities has not but formally notified it.

    In each schemes, people get a tax deduction after they make investments; there isn’t any tax through the accumulation part and on maturity.

    While the rate of interest on PPF is decrease than EPF at current, the previous entails lesser administrative work. In EPF, it’s essential to switch the steadiness from the earlier employer to the brand new one as soon as you allow the job.

    If you withdraw the cash as a result of you’ve left the job, you could have to pay tax when you have not accomplished 5 years together with your employer.

    If you might be confused about whether or not to extend the EPF contribution and PPF, do take a name primarily based on the rates of interest and administrative work concerned within the two.

    Do you’ve private finance queries? Send them to [email protected] and get them answered by trade specialists.

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  • CRAs to make adjustments in transaction assertion to assist NPS subscribers’ grievances

    NEW DELHI: The Pension Fund Regulatory and Development Authority (PFRDA) has issued a round stating new NPS functionalities launched by Central Record Keeping Agencies (CRAs) throughout the fourth quarter of FY21.

    According to the round issued on 27 May, “CRAs have the responsibility to develop new functionalities, utilities, establish new processes, and offer multiple models of interface for the uploading offices to provide maximum flexibility in terms of operation for the benefit of the subscribers as an ongoing exercise to fulfil their obligations.”

    The CRA has made sure adjustments within the assertion of the transaction to cut back the grievances of National Pension System (NPS) subscribers.

    Changes in Contribution/Redemption Block

    Change in block header to ‘Contribution/Redemption Details throughout the chosen interval’.

    Changes in funding particulars

    It must be made as a scheme-wise abstract block. Further, there’s a must take away scheme-wise contribution and unrealised achieve/loss fields.

    Changes within the transaction particulars block

    As per the revised format, the opening unit steadiness in transaction particulars shall be displayed solely within the first block and the closing unit steadiness in transaction particulars shall be displayed solely within the final block. Earlier, if the subscriber made adjustments in PF and/or scheme setup then a number of transaction element blocks had been displayed the place the primary block represented PF-scheme particulars as on assertion opening interval and final confirmed PF-scheme particulars as on assertion closing interval.

    Changes in footnotes

    First, the addition of footnotes associated to “Cost of withdrawal/one-way switch/GPF Withdrawal”, system-generated assertion and signature not required and many others. Second, modification in observe associated to a tax profit.

    The following adjustments are being made as a result of bifurcation of ‘Ladakh’ from ‘Jammu & Kashmir’ and merging of UT (Union Territory) – ‘Daman & Diu’ and ‘Dadra & Nagar Haveli’. This results in the creation of a brand new code within the CRA system to map current Permanent Retirement Account Number (PRAN) and places of work to ‘Ladakh’ UT. Changes in contribution will permit each governments to make a contribution in PRANs of the subscriber.

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  • Assets beneath NPS rose to 36% year-on-year until April 2021: PFRDA

    NEW DELHI :
    The Pension Fund Regulatory and Development Authority (PFRDA) introduced on Wednesday that it has reached a file 42.6 million subscribers beneath the National Pension System (NPS) and Atal Pension Yojana (APY) on the finish of the Financial Year 2020-21. Moreover, the mixed belongings beneath administration (AUM) of the NPS and APY elevated to 36.05% year-on-year (y-o-y) to the touch ₹5.89 trillion as of April 2021.

    Number of subscribers in numerous schemes beneath NPS and APY

    View Full ImageSource: PFRDA

    The variety of subscribers in numerous schemes beneath the NPS rose to 42.675 million by end-April 2021 from 34.601 million in April 2020 displaying a y-o-y improve of 23.33%

    While evaluating it with final month, the subscribers beneath the NPS and APY reached 42.4 million in numbers. This reveals that there’s a rise of roughly 200,000 subscribers this month. While the AUM of NPS stood at ₹5.78 trillion in March, this month it reaches ₹5.89 trillion. There is a rise of ₹11,000 crore in AUM.

    The pandemic has not impacted the becoming a member of of subscribers as compared with the years earlier than covid-19. An enormous cause often is the residents have began realizing the uncertainty of life and the necessity for monetary safety and retirement planning.

    Total Assets beneath Management beneath NPS and APY

    View Full ImageSource: PFRDA

    In the monetary yr 2020-21, PFRDA has launched numerous new insurance policies to make the system seamless, from entry to exit in NPS. The coverage initiatives embody the subscribers’ onboarding, the exit course of, the brand new strategies of subscriber authentication akin to OTP/ e-Sign based mostly onboarding, Offline Aadhaar-based verification, and third-party onboarding after KYC verification, e-nomination, e-exit for NPS Subscribers, penny drop for checking account verification, and so forth.

    Currently, NPS is prolonged to all residents of India (resident/non-resident/abroad) voluntarily and corporates for its staff. NPS is obligatory for presidency staff who joined service after 2004 and it was opened to the non-public sector in 2009. NPS is low-cost and is a fairly tax-efficient funding avenue.

    Besides, APY is a periodic contribution-based pension plan and offers a assured pension of ₹1,000- ₹5,000 to subscribers.

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  • Before withdrawing from provident fund, consider different choices

    MUMBAI: Many people are turning to their provident fund (PF) within the present occasions because of monetary stress. According to stories, over 35 million (3.5 crore) subscribers have withdrawn funds from PF accounts since April 2020. However, funding advisors normally counsel that cash in worker provident fund or National Pension Scheme needs to be the final funding one ought to liquidate throughout a disaster.

    These retirement financial savings schemes enable you accumulate a corpus throughout your productive years for the longer term, and you shouldn’t contact them until there’s nothing else left to redeem. If you partially withdraw now, you might face difficulties throughout your silver years.

    Before opting to take cash out of the federal government’s retirement schemes, take inventory of your present investments. Based on the penalty, fees, liquidity and taxation, prioritise which one you’d liquidate.

    Among all of your investments, first take a look at liquidating financial institution mounted deposits (FD), firm FDs and liquid and debt funds. They are simpler to liquidate. Then take a look at fairness mutual funds and direct fairness. It’s simpler to liquidate these devices.

    Next comes gold. Typically, jewellers cost a charge once they purchase again bodily gold. If you might be promoting sovereign gold bonds on exchanges, you might discover it difficult to get the precise worth because of an absence of liquidity. But when you have investments in gold exchange-traded funds or gold financial savings funds, you’ll be able to liquidate them earlier than fairness funds.

    Most of the small financial savings schemes are tough to liquidate. That’s why preserve them because the second final possibility. Pension merchandise like EPF needs to be left untouched until not one of the above choices works for you.

    Selling a property is all the time difficult until you go for a misery sale. It may take few days to months to promote one.

    There are another choices you might think about as an alternative of withdrawing cash from the provident fund. You can take a mortgage towards conventional life insurance coverage schemes and even sovereign gold bonds.

    (Do you’ve private finance queries? Send them to [email protected] and get them answered by trade consultants)

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  • India social safety contributions and widening of the tax regime

    The backdrop

    Till monetary yr 2019-20, solely contribution by the employer to the account of an worker greater than the prescribed thresholds was taxable as perquisite within the arms of the workers. (See Chart 1)

    Contributions as much as the prescribed threshold didn’t get taxed at any level of time, since Exempt-Exempt-Exempt (EEE) regime was adopted for these retiral funds.

    Even although a separate threshold was prescribed for every fund, there was no mixed financial threshold for employer’s contribution to such funds. As a results of this, sure people have been in a position to construction their compensation in a way that a big portion of their wage was paid by employer within the specified funds. However, provided that the employer’s contribution was properly throughout the aforesaid limits, the contribution was not taxable.

    Further, given the EEE regime, such contributions have been by no means topic to tax. The authorities vide Finance Act 2020 determined to supply an general cap on the employer’s contribution to PF, SAF and NPS.

    View Full ImageRetirement planning

    New taxation provisions

    The authorities vide Finance Act, 2020 determined to tax the employer contribution to those specified funds, in extra of sure limits and annual accretion thereon. This accretion may very well be in type of curiosity, dividend or another quantity of comparable nature.

    Accordingly, efficient FY2020-21, it was supplied that if the combination contribution made by an employer to the required funds is in extra of `7.50 lakh (extra contribution), then the surplus contribution might be taxable as perquisite within the arms of the worker. Such perquisites might be included in worker’s wage and taxed on the relevant slab charges. This additionally consists of the curiosity or revenue accrued in respect of such extra contribution.

    Recently, the federal government additionally notified the way of computing the annual accretion by the use of curiosity, dividend, and so forth., on such extra contribution. A formula-based strategy has been prescribed which, inter-alia, requires particulars of opening and shutting steadiness of those funds and the rates of interest or NAVs, because the case could also be.

    Implications for the employer

    The employer is required to estimate the taxable wage of worker and withhold tax at common charge of tax through the monetary yr. Accordingly, the employer is now required to withhold tax on extra contribution and the annual accretions thereon in these funds.

    Challenges forward

    As a results of the aforesaid adjustments and computation methodology prescribed, there are specific sensible challenges being confronted by employers which should be addressed:

    * Cases the place employer is contributing to a couple of specified fund. (See Chart 2) In such instances, there’s lack of readability on how this extra contribution i.e. ₹50,000, is to be computed. In different phrases, the surplus contribution could be attributable to which fund has not been clarified. Therefore, a query arises whether or not an employer can suo moto resolve or allocate it proportionately to all of the funds within the ratio of contribution made by it.

    It is pertinent to notice that this could even have a consequential affect on the taxable accretions as properly, that are labored out in another way for these specified funds.

    * This methodology for computation of accretion on extra contribution, relevant for 2020-21, was notified on 5 March 2021 and therefore, corporations have to now think about this whereas figuring out the taxes to be deducted for FY2020-21. This poses a sensible problem for the employer, being the tip of the monetary yr.

    * Information just like the earnings of the fund, and opening and shutting steadiness of the required funds just isn’t available through the yr, with the employers. They want to hunt these particulars from the workers and there could also be knowledge privateness issues for the workers. Even if the workers reluctantly share these particulars, sufficient documentation to substantiate this data would additionally should be maintained by the employer. This will add to the executive burden for the employers.

    * The different problem could be by way of availability of the rates of interest e.g. the rates of interest for PF will not be introduced initially of the monetary yr, it could be troublesome to compute the revenue accrued through the yr. Accordingly, for such instances, the federal government ought to present steering concerning the way through which the taxable perquisite is to be computed through the yr. Should the employer think about the rate of interest of final yr or common rates of interest of final two earlier years, and so forth. One technique to resolve this situation is {that a} true-up is completed by employer earlier than issuing Form 16, if the speed is out there by then or the workers might achieve this in his / her revenue tax returns.

    * In most instances, the revenue accrued for the whole monetary yr might be ascertained solely after the tip of the monetary yr, for the reason that contribution for March 2021 would additionally kind a part of the whole quantity on which the accrued revenue is to be decided. So, readability is required if the true-up may very well be performed by employer within the subsequent monetary yr.

    * There could be a separate set of challenges when staff be part of or depart the group through the yr i.e. instances the place settlements are pending.

    * In case of specified funds that are NAV-based (NPS), the NAV continues to vary through the yr and the ultimate NAV is out there solely after the tip of the monetary yr.

    The above points might result in administrative challenges each for the employers and staff. It is feasible that totally different approaches could also be adopted by totally different organizations, which can result in unintentional non-compliance, dispute and litigation. Therefore, a few of these points require consideration and ought to be clarified.

    Vikas Vasal is nationwide managing accomplice–Tax at Grant Thornton Bharat LLP.

    Richa Sawhney and Ankita Chowdhry contributed to this text.

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