Tax Query: Will NPS withdrawals for senior citizens be taxed?

I am a Senior Citizen retired from PSB in Sep 2019. From 2019 onwards I had invested ₹50,000 per year in NPS to avail tax benefit under Sec 80CCD(1B). Now my total investment is ₹200,000 for the AY up to 2022-23. Please clarify whether now I can withdraw the entire amount of Rs 200,000 along with the income accrued from the scheme. If so, after withdrawal whether I can enrol again from FY 2022-23 and invest again for availing tax benefit?

V.Avichi

Section 80CCD(1B) of the Income-tax Act, 1961, provides additional deduction of up to ₹50,000 for investments made in NPS (Tier I account). As per Pension Fund Regulatory and Development Authority (PFRDA) Exit Rules, the NPS subscribers are allowed to withdraw 60 per cent of the accumulated pension. Balance 40 per cent will be paid by way of monthly annuity. However, in case the total corpus is less than ₹2 lakh, the subscriber can avail the option to withdraw the entire corpus amount.

Understand that your accumulated pension (including the accrued income) until FY 2021-22 would exceed the threshold of ₹2 lakh. Hence, you would be eligible to withdraw 60 per cent corpus.

You may note that the subscribers are allowed to invest in NPS until the age of 75 years. Therefore, you could continue to invest in NPS during FY 2022-23 and onwards and claim the eligible tax deductions.

My son is a salaried employee of a private organisation. He has also a rental income from house property. As such, he pays advance tax for his rental income. He had submitted income tax return for AY2021-22 and has received notification that the assessment has been completed. While depositing advance tax for AY2022-23, he had wrongly entered it as that for AY2021-22. The mistake has been noticed only while checking the Form 26AS for AY2022-23. What options are now available for him? How can the amount wrongly deposited as advanced tax for AY 2021-22 be adjusted for AY 2022-23?

SN Mukherjee

Generally, whenever the assessment year is incorrectly mentioned in the tax challan, then, within 7 days of tax payment, bank which facilitate the payment transaction will be able to rectify the error.

Assuming that the 7-day timeline is past, you could make a request to the jurisdictional assessing officer with a copy of the tax challan along with reasons in order to change the assessment year. You could access the format for this request https://incometaxindia.gov.in/Documents/challan-correction-mechanism-26082011.pdf.

The writer is Partner, Deloitte India Send your queries to taxtalk@thehindu.co.in

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