JKSSB Written 2024
Answer & Explanation
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Correct Answer:
Option B —
100%
There has been a significant evolution in the tax treatment of the National Pension Scheme (NPS) under Section 10(12A) of the Income Tax Act:The 100% Exemption: Currently, when a subscriber reaches the age of 60 or matures the account, they are allowed to withdraw up to 60% of the total accumulated corpus as a lump sum, which is entirely tax-free (100% exempt).
The Annuity Component: The remaining 40% must be utilized for purchasing an annuity (regular pension). This 40% portion is also exempt from tax at the time of conversion/purchase.
Total Result: Since 60% (lump sum) is exempt and 40% (used for annuity) is exempt at the time of closure, the entire amount payable at the time of closure is effectively exempt from tax at that stage. (Note: The subsequent pension received from the annuity will be taxable as per the individual's income slab).
Why other options are incorrect:
A) 30%: This is not a standard exemption limit for NPS closure.
C) 40%: This was the previous exemption limit for the lump-sum withdrawal before it was increased to 60% to make NPS more competitive with EPF.
D) 25%: This refers to the limit for partial withdrawals (under specific conditions like education or marriage) allowed under Section 10(12B), not the final closure.
Answer verified by Quintessence Classes faculty — Karan Nagar, Srinagar.