Latest news with #TaxationLaw(Amendment)Bill
Time of India
5 days ago
- Business
- Time of India
Changes in tax on lumpsum and premature withdrawals under UPS and NPS in the latest version of Income Tax Act, 1961
Income tax exemptions for UPS Academy Empower your mind, elevate your skills Finance minister Nirmala Sitharaman introduced the Taxation Law (Amendment) Bill, 2025, in today's Lok Sabha session. This Bill aims to amend the Finance Act, 2025 and the Income Tax Act, 1961. The main focus of these changes is to align the tax treatment of UPS ( Unified Pension Scheme ) with that of NPS ( National Pension System ). Here are some key updates included in the Taxation Law (Amendment) per the bill, any payment made from the NPS Trust to a UPS subscriber, which does not exceed 60% of the individual's corpus at the time of superannuation, voluntary retirement or retirement, shall be exempt from income to the bill, 'any payment from the National Pension System Trust to an assessee, who is a subscriber to the Unified Pension Scheme, to the extent that it does not exceed sixty per cent of the individual corpus, as specified in notification number FX-1/3/2024-PR, dated the 24th January, 2025 of the Department of Financial Services, made at the time of his superannuation or voluntary retirement or retirement under clause (j) of rule 56 of the Fundamental Rules [which is not treated as penalty under the Central Civil Services (Classification, Control and Appeal) Rule.'According to the bill, 'any sum received as a lump sum amount as per clause (vi) of paragraph 2 of the notification number FX-1/3/2024-PR, dated the 24th January, 2025, of the Department of Financial Services, by an assessee being a subscriber to the Unified Pension Scheme will also be tax exempt.'As per law, a lump sum payment will be allowed on superannuation at the rate of 10% of monthly emoluments (basic pay + Dearness Allowance) for every six months of qualifying service you complete. Moreover, this lump sum payment will not affect the amount of assured bill further adds that, 'where any amount standing to the credit of the assessee, being a subscriber to the Unified Pension Scheme, in his account referred to in sub-section (1) or sub-section (1B), in respect of which a deduction has been allowed under those sub-sections or sub-section (2), together with the amount accrued thereon, if any, is received by the assessee or his nominee, in whole or in part, in any previous year on account of his superannuation or voluntary retirement or retirement under clause (j) of rule 56 of the Fundamental Rules [which is not treated as penalty under the Central Civil Services (Classification, Control and Appeal) Rules, 1965], as may be applicable, the whole of the amount shall be deemed to be the income of the assessee or his nominee, as the case may be, in the previous year in which such amount is received, and shall accordingly be charged to tax as income of that previous year.'Simply put, if the UPS subscriber or their nominee receives any amount from the scheme before their superannuation, retirement or voluntary retirement, it will be treated as income in the hands of the individual and taxed CA Ashish Niraj, Partner, A S N & Company Chartered Accountants explains, this sub-section has been inserted to clarify that in case the assesee closes the account or opts out of the pension scheme referred to in sub-section (1) or sub-section (1B), then such amount will be deemed to be his income in that previous year and will be CA Mohit Gupta, 'if an assessee (subscriber to the Unified Pension Scheme) receives any amount (including accrued income) from their pension account—where deductions were claimed earlier under Section 80CCD(1), (1B), or (2)—on superannuation, voluntary retirement, or retirement under Rule 56(j) of the Fundamental Rules (not treated as penalty), the entire amount will be treated as taxable income in the year of receipt'.Additionally, if the remaining balance in the individual corpus is transferred to the pool corpus on his superannuation, voluntary retirement or retirement, it won't be treated as income for the taxpayer in that year. According to CA Ashish Niraj, Partner, A S N & Company Chartered Accountants, this is merely shifting funds from individual corpus to pool corpus for annuity purposes, and hence, does not invite Prabhakar K S, Founder & CEO, Shree Tax Chambers, "with effect from April 1, 2025, any amount received by an assessee or their nominee on superannuation or retirement will be considered income in the year it's received and will be charged to tax accordingly. A subscriber, upon attaining 60 years, can withdraw 60% of the total corpus as a lump sum, which is tax-free. The remaining 40% should be utilised to buy annuities. The annuity income is taxable as per the applicable income tax slab rates".
India.com
12-08-2025
- Business
- India.com
2025 Income Tax Bill Changes: More Tax-Free Lump Sum, Bigger Penalties For Early UPS/NPS Withdrawals
New Delhi: Finance Minister Nirmala Sitharaman has introduced the Taxation Law (Amendment) Bill, 2025 in the Lok Sabha. This bill updates the Finance Act, 2025, and the Income Tax Act, 1961, with the primary aim of aligning the taxation rules of the Unified Pension Scheme (UPS) with those of the National Pension System (NPS). 1. Tax-Free Withdrawals at Retirement UPS subscribers will be allowed to withdraw up to 60 percent of their pension corpus at the time of retirement, voluntary retirement, or superannuation without paying any income tax. 2. Lump Sum Payment on Superannuation Upon superannuation, subscribers can receive a lump sum amount equal to 10 percent of their monthly salary (basic pay + dearness allowance) for every six months of qualifying service completed. This payment will not reduce the subscriber's assured monthly pension. 3. Tax on Early Withdrawals If a subscriber or their nominee withdraws money from their UPS account before retirement or superannuation, the entire amount withdrawn will be treated as income and taxed in that financial year. 4. Exit from the Scheme or Account Closure Closing a UPS account or opting out of the scheme before retirement will also make the withdrawn amount, including any accrued interest or returns, fully taxable in the year of withdrawal. 5. Transfer to Pool Corpus At retirement, if any remaining balance in the subscriber's corpus is moved to the pool corpus for purchasing annuities, this transfer will not be treated as taxable income. 6. Rules at Age 60 When a subscriber turns 60, they can withdraw 60 percent of the total pension corpus tax-free, while the remaining 40 percent must be used to purchase an annuity plan. The income from the annuity will be taxed as per the subscriber's applicable income tax slab.
Time of India
11-08-2025
- Business
- Time of India
Changes in tax on lumpsum and premature withdrawals under UPS and NPS in the latest version of Income Tax Bill
Income tax exemptions for UPS FM Nirmala Sitharaman, in today's Lok Sabha session, introduced the Taxation Law (Amendment) Bill, 2025, which is further set to amend the Finance Act, 2025 and the Income Tax Act, 1961. Most of the changes herein focus on bringing UPS on par with NPS in terms of tax treatment . Here are some major changes that have been presented in the Taxation Law (Amendment) per the bill, any payments from the NPS Trust to a UPS (United Pension Scheme) subscriber, which do not exceed 60% of the individual's corpus at the time of superannuation, voluntary retirement or retirement, shall be exempt from income to the bill, 'any payment from the National Pension System Trust to an assessee, who is a subscriber to the Unified Pension Scheme , to the extent that it does not exceed sixty per cent of the individual corpus, as specified in notification number FX-1/3/2024-PR, dated the 24th January, 2025 of the Department of Financial Services, made at the time of his superannuation or voluntary retirement or retirement under clause (j) of rule 56 of the Fundamental Rules [which is not treated as penalty under the Central Civil Services (Classification, Control and Appeal) Rule.'Furthermore, the bill states that, 'any sum received as a lump sum amount as per clause (vi) of paragraph 2 of the notification number FX-1/3/2024-PR, dated the 24th January, 2025, of the Department of Financial Services, by an assessee being a subscriber to the Unified Pension Scheme will also be tax per law, a lump sum payment will be allowed on superannuation at the rate of 10% of monthly emoluments (basic pay + Dearness Allowance) for every completed six months of qualifying service. Moreover, this lump sum payment will not affect the quantum of assured bill further adds that, 'where any amount standing to the credit of the assessee, being a subscriber to the Unified Pension Scheme, in his account referred to in sub-section (1) or sub-section (1B), in respect of which a deduction has been allowed under those sub-sections or sub-section (2), together with the amount accrued thereon, if any, is received by the assessee or his nominee, in whole or in part, in any previous year on account of his superannuation or voluntary retirement or retirement under clause (j) of rule 56 of the Fundamental Rules [which is not treated as penalty under the Central Civil Services (Classification, Control and Appeal) Rules, 1965], as may be applicable, the whole of the amount shall be deemed to be the income of the assessee or his nominee, as the case may be, in the previous year in which such amount is received, and shall accordingly be charged to tax as income of that previous year.'Simply put, if the UPS subscriber or their nominee receives any amount from the scheme before their superannuation, retirement or voluntary retirement, the same will be treated as income in the hands of the individual and taxed CA Ashish Niraj, Partner, A S N & Company Chartered Accountants explains, this subsection has been inserted to clarify that in case the assesee closes the account or opt out of pension scheme referred to in sub-section (1) or sub-section (1B) then such amount will be deemed to be his income in that previous year and will be CA Mohit Gupta, 'if an assessee (subscriber to the Unified Pension Scheme) receives any amount (including accrued income) from their pension account—where deductions were claimed earlier under Section 80CCD(1), (1B), or (2)—on superannuation, voluntary retirement, or retirement under Rule 56(j) of the Fundamental Rules (not treated as penalty), the entire amount will be treated as taxable income in the year of receipt'.According to CA Gaurav Makjhiani, tax lead at Roedl & Partner, this clarification is introduced to ensure complete parity in tax treatment between the two schemes. For relevant employees, this removes a major barrier to adopting UPS, as the same deductions for contributions and exemptions on withdrawals are now according to the bill, if the balance outstanding in the individual corpus is transferred to the pool corpus on his superannuation, voluntary retirement or retirement, the same will not be treated as income of the assessee in that year. As per CA Ashish Niraj, Partner, A S N & Company Chartered Accountants, this is merely shifting funds from individual corpus to pool corpus for annuity purposes, and hence, does not invite taxes.
