In a significant move, the Pension Fund Regulatory and Development Authority (PFRDA) has altered National Pension Scheme (NPS) rules.
You can now withdraw up to 60% of your savings monthly, quarterly, half-yearly, or annually, providing greater flexibility.
Previously, withdrawals were allowed only once a year or as a lump sum. This change aims to better support retirees’ monthly financial needs.
Who Benefits and How?
Financial expert CA Manish Garg explains the benefits using an example. Consider a 60-year-old individual with a retirement corpus of Rs 1.5 crore.
Without pension options, they invested Rs 30 lakh in the Senior Citizen Savings Scheme, yielding an 8% interest of Rs 2,40,000 per year.
The remaining Rs 1.20 crore, invested in Post Office MIS/Bank FD, would generate around 7.4% to 7.5% interest, amounting to Rs 9 lakh.
However, the annual interest of Rs 11,40,000 is taxable, resulting in approximately Rs 65,500 in taxes.
After taxes, the net income from interest is about Rs 10,74,500, which translates to roughly Rs 89,541 per month.
Moreover, the principal amount of Rs 1.5 crore remains unchanged even after 15 years.
Benefits of the New NPS Rule
CA Manish Garg elaborates that if the same person accumulates Rs 1.5 crore through NPS by the age of 60
and systematically withdraws 60%, i.e., Rs 90 lakh, as per the new rules until the age of 75, they will receive approximately Rs 11,83,000 monthly with a 10% interest rate.
Importantly, this amount is entirely tax-free. This means a monthly income of around Rs 1 lakh for 15 years.
Simultaneously, if the 40% annuity continues to grow by 10% annually, it will reach Rs 2,50,63,489 in 15 years.
Double Benefits from NPS
Garg highlights that this is a Diwali gift from the Modi government. NPS now provides a monthly benefit of approximately Rs 10,000 from the age of 60 to 75, completely tax-free.
Additionally, the initial capital grows to around Rs 2.5 crore instead of Rs 1.5 crore.
