NPS Reforms: 100% Equity Option and 80% Lump-Sum Cap
Why in the news
NPS, open to the non-government sector since 2009, is being made less rigid and more attractive to private-sector and optional subscribers.
Major reforms
| Area | Change |
|---|---|
| Equity | 100% equity allowed for non-government subscribers |
| Portfolios | Bespoke: debt-heavy near retirement, equity-heavy for young investors |
| Lump-sum withdrawal | Cap from 60% to 80%; 20% kept for annuity |
Benefits
- Equities may beat debt over the long run.
- Fees are lower than mutual funds.
- Up to ₹50,000 a year qualifies for exemption under the old regime.
Concerns
- Annual exemption exists only in the old tax regime; future unclear if the new one takes over.
- Lump-sum tax exemption stays at 60% though withdrawals can reach 80%.
- NPS rules and tax law need alignment.
Exam angle
- New cap: 80%; annuity share: 20%.