Now Partial Withdrawal Under NPS Possible! Should You Invest?   Mar 09, 2018

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The government seems committed to altering state-administered retirement schemes to be more flexible and subscribers’ friendly.

After easing the Employees Provident Fund’s norms (EPF) , now it wants to make the National Pension Scheme (NPS) more attractive and subscriber-centric.

The Pension Fund Regulatory and Development Authority (PFRDA)——the regulator of NPS——eased the partial withdrawal rules. With this, NPS subscribers would be eligible for the partial withdrawals after the first three years of joining the scheme.

It’s noteworthy that only the accumulations linked to the subscriber’s contributions qualify as withdrawal funds, only “under specific circumstances”, as mentioned in the regulations.

Moreover, the maximum permissible withdrawal shall be only upto 25% of the contributions made by him/her and standing to his or her credit in his/her individual pension account, as on the date of application for withdrawal.

You can opt for partial withdrawals only thrice during the entire span of your subscription.

Earlier, the partial withdrawals were allowed only after 10 years from the date of joining the scheme. Then too, you were permitted to opt for partial withdrawals only thrice throughout your membership period.

Will these changes make NPS a good investment?

Under “All Citizen Model”, a citizen of India——whether resident or non-resident——aged between 18 and 65 can become an NPS subscriber.

A salaried person gets a tax exemption of upto 10% of Salary (Basic + dearness allowance) under Section 80 CCD(1) within the overall ceiling of Rs. 1.50 lakh under Sec 80 CCE.

Nonetheless, the employee can also claim the deduction for the contributions made by the employer under Sec 80 CCD(2) over and above the limit of Rs. 1.50 lakh provided under Sec 80 CCE.

The quantum of deduction and the definition of salary remains the same as in the case of own contributions.

Self-employed individuals can claim deductions of 20% of gross income under Sec 80 CCD (1) within the overall ceiling of Rs. 1.50 lakh under Sec 80 CCE.

Moreover, the subscribers can claim additional deduction of upto Rs 50,000 under section 80CC D(1) for additional contribution in their NPS account. 

NPS offers an applicant freedom to decide how his money will be invested. It offers two options—Active Choice and Auto Choice.

Active Choice Auto Choice
(Source: PersonalFN Research)

For applicants investing in Active Choice, the entire pension wealth can be invested in Asset Class C or G and upto a maximum of 50% in equity (i.e. Asset Class E).

While those investors lacking the knowledge to manage their NPS investment can opt for Auto Choice (i.e. Lifecycle Fund). Here, the fraction of funds invested across three asset classes will be determined by a pre-defined portfolio.

Why NPS isn’t a good investment?

  • Inefficient Taxation: NPS does not enjoy the Exempt-Exempt-Exempt status unlike Employees Provident Fund (EPF) and Public Provident Fund (PPF).

    As per the current tax laws, 60% of the accumulated retirement corpus will be brought under the tax ambit, making it unpopular vis-à-vis PPF.

    Moreover, the life annuity that a subscriber has to mandatorily purchase from the retirement corpus is also taxable as per the prevailing tax laws.

  • Inability to beat inflation: A subscriber to the NPS is forced to buy a life annuity from a life insurance company. Annuities offer paltry returns (in the range of 3% to 7% pre-tax) making it an incompetent instrument to beat inflation.

What investor should do?

Despite, its shortcomings, you may still consider investing in NPS, but, you shouldn’t solely depend on it to satisfy your retirement savings needs.

Taking into account the years left in your retirement and your risk appetite, it is preferable to create a personalised retirement plan. Mutual funds make a good investment avenue to create a retirement corpus.

In case you aren’t sure, which mutual funds to invest in and have no time to do mutual fund research on your own, you may take the help of an expert.

Editor’s Note:

Want to create a personalised retirement plan? Want to know which are best investment avenues for retirement?

Looking for assistance to walk the path to a blissful retired life?

PersonalFN's Financial Guardian will assist you in planning your retirement. You can reach out to PersonalFN on (022) 61361200, or write to

Depending on your age, your risk profile, number of years left to your retirement, PersonalFN will help you define your asset allocation and draw up a personalised financial plan, so that you can fulfil your dream of living a comfortable retired life.

To know how much you need to live a comfortable retired life, use PersonalFN's retirement calculator. It is an online tool that gives you results in less than a few seconds.

Good News! Now New NRIs Can Operate A PPF Account Long term


Travelling the world to explore exciting career opportunities isn’t new. But what’s probably unheard is the change in your residential status from resident to Non-Resident Indian (NRI) puts you at a considerable disadvantage as an investor.

Historically, Indian laws have been kind to NRIs. But, times are changing now…

In October 2017, the government released a circular stating from the day you become an NRI, an investor’s PPF (Public Provident Fund) account shall be deemed deactivated.

Before this rule was introduced, the NRIs were allowed to keep their resident-PPF account running until maturity without any extension thereafter.

And then the government decided to take a ‘U’ turn

As you must be aware, the government recently proposed to merge the Government Savings Certificates Act, 1959 and Public Provident Fund Act, 1968 with the Government Savings Banks Act, 1873.

The provisions of these to-be-merged Acts would be subsumed with the Government Savings Banks Act, 1873, simultaneously amended without compromising on any of the functional provision of the existing Act.  

Since PPF is a  Small Savings Scheme (SSS), the government is committed to protecting all the earlier benefits available to investors.

To read more and Personal FN’s views, please click here.

Are Banking Sector Mutual Funds Worth Risking Your Money?


We have some bad news and some good news.

The bad news: Frauds and scams have exposed the government and the banking regulator — clearly RBI was napping.

The good news: The government and RBI are willing to learn from their mistakes this time.

The Punjab National Bank (PNB) scam has turned into a nightmare for the entire Indian banking system and the Public Sector Banks (PSBs) in particular. What appeared to be the branch-level fraud initially is now emerging as a full-blown crisis.

As many as 31 banks are affected directly or indirectly by the PNB fraud — one of the biggest scams in the history of Indian banking industry. 

Government agencies have swung into action faced with the tough task of protecting their credibility. They are leaving no stone unturned to uproot the problem. At least, they are demonstrating an attempt to get the perpetrators of frauds — the Modis and Choksis back to India.

As they say, “when the elephants fight, it is the grass that suffers.” 

To read more and Personal FN’s views, please click here.

Is Perpetual SIPs In Mutual Funds A Good Idea?


Over the recent few months, the personal finance section of newspapers and business magazines have often highlighted about mutual funds’ Systematic Investment Plan (SIP) accounts achieving new milestones.

As per the latest AMFI report, Mutual Fund SIP accounts stood at 19.7 million as in December 2017. As much as Rs 6,600 crore was collected through SIPs in the same month.

Clearly, over the past few years, investing in mutual funds through SIPs has become a fad. So much so, that SIPs have become synonymous with mutual funds.

Being in the mutual fund space for several years now, I have come across and have answered queries seeking the “best SIPs”. Though SIP refers to a Systematic Investment Plan, which is only a facility to invest in mutual funds on a regular basis. What people are actually seeking is the best mutual fund to start a SIP.

Earlier, nascent investors used to go scouting for the “best mutual funds” or “top mutual funds”. But now, amateur savers seek the “best SIPs” or “top SIPs”. Though unintentionally mistaken, people assume SIPs to be a standalone mutual fund product.

A simple search on Quora will lead you to multiple queries on “best SIPs”.

To read more on Perpetual SIPs and Personal FN’s views, please click here.


Canara Robeco Equity Tax Saver Fund: A Top ELSS Fund Of Yesteryears

Canara Robeco Equity Tax Saver Fund is a multi-decade-old fund in the Equity Linked Savings Scheme (ELSS) category that comes from the stable of, Canara Robeco Mutual Fund, started by one of the first public sector banks to enter the asset management business.

Launched way back in 1993, the a href=" " style="color:#fd7319" target="_blank">ELSS fund couldn't create a very rosy history for the first 15 years. It was only after Netherlands-based investment management firm Robeco NV collaborated with Canara Bank in 2007, the fund house started witnessing a turnaround in performance.

Canara Robeco Equity Tax Saver Fund did well across many market cycles up to March 2015, and ranked among the top ELSSs. But to investor's disappointment, the scheme failed to consistently deliver stellar returns as its performance deteriorated drastically over the past couple of years. Notably, Canara Robeco Equity Tax Saver Fund underperformed both the benchmark and its peers over the past two market cycles.

Click here to read the complete note.

And Other News...

March 31, 2018 is the deadline to link your Aadhaar to the various government schemes you might be availing benefits.

But this might be extended for one more time! It will take more time to conclude the hearing of the long-pending cases against making Aadhaar mandatory.

Nonetheless, if you have an Aadhaar number, it’s better to link it before March 31st. Waiting for the extension of the deadline could be in vain.


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