How your NPS Tier II account withdrawals are taxed


National Pension System (NPS) has two type of accounts: Tier I Tier II. Tier I account is the main account is mandatory whereas opening of Tier II account is optional. Tier II account is like a saving bank account where you can deposit withdraws money as when you want. One can transfer money anytime from Tier II account to Tier I account not vice versa. All subscribers are eligible for tax benefits for contributions made to Tier I account but tax benefits for Tier II account contributions are available only to central government employees with three years lock-in period. Since there are no specific provisions for taxation of withdrawals from Tier II account under the law, I thought I will try to explain how such withdrawals should be taxed logically?

Are the withdrawals from Tier II account taxable?

As per Section 10 (12A) of Income Tax Act, 60% of the amount withdrawn on closure or at the time of opting out from the account referred to in Section 80 CCD are tax-free in the hands of the subscriber. Likewise, at the time of partial withdrawals 25% of subscriber’s contribution, from the account referred to in Section 80 CCD comes tax-free as per Section 10 (12B). Section 80 CCD implied refers only to Tier I account because deduction under this section is available only for contribution to Tier I account not for contributions made to Tier II account for which deduction is available under Section 80C(2)(xxv).

There is no specific direct provision for taxation of withdrawal from Tier II account under the Income Tax Act. If tax law does not have any specific provisions for taxation of an item, it does not by default becomes tax-free or taxable. In such a situation one has to apply the logic take help of other provisions of the same law. The full value of the money withdrawn from Tier II account cannot be taxed as the law makers would not have contemplated taxing something at the time of withdrawal if no tax benefit has ever been claimed when the money was deposited. But this does not mean that the entire amount withdrawn would come tax free. The withdrawals from Tier II account are like regular withdrawals from your saving bank account, which are not taxed except to the extent of interest earned.

For arriving at the logical rules for taxation of Tier II account withdrawals I take support from provisions of Section 80CCC. Section 80CCC (1) provides for deduction of premium paid to buy an annuity. Section 80 CCC (2) provides for taxing of surrender value of such policy which restricts the taxability to the extent to which the tax benefits under Section 80 CCC(1) have been claimed by the individual not beyond that except the accretion to the investment. The same logic has to be applied here.

How the withdrawals should logically be taxed

Due to the reasons explained above I am of the strong opinion that whole of the money withdrawn from Tier II account cannot be taxed by any stretch of imagination. What can should logically be taxed is the appreciation, if any in the value of investments as comprised in the withdrawals.

Since the investment made in Tier II account does not carry any fixed rate of return like fixed deposits or bonds or debenture, the appreciation in the value of investments cannot be taxed under the head “Income from other sources”. As a subscriber is allotted units for his investments in different categories of funds like of equity, corporate bonds government securities at their Net Asset Value (NAV) at the time of investment, it is logical to treat contribution to tier II account as investments treat any profits thereon as capital gains.

Since investment in NPS can neither be called listed equity shares nor can be treated as units of equity mutual funds, it shall become long term only if the units are sold after 36 months. Since Securities Transactions Tax (STT) is not paid at the time of redemption, the same cannot be taxed as equity oriented schemes under Section 112A even in respect of the equity component. It shall be taxed at flat of 20% after indexation if held for more than 36 months. If the units are redeemed within 36 months, the profits on redemption is to be treated as short term capital gains to be included in your regular income which will get taxed at the slab rate applicable to your total income.

The difference between NAV of purchase redemption has to be multiplied by the number of the units used for redemption to arrive at the profit on realised on redemption of specific transaction.

Please note that whatever I have mentioned is not the exact legal position in absence of specific direct provision in the Income Tax Act but is purely my opinion arrived at with the help of common sense logic. In view of the confusion surrounding tax on withdrawal for Tier II account, it is the duty of the government to make the legal position clear as early as possible. This will help many people to take the decision to avail the benefit of low cost investment avenue of Tier II account.

Balwant Jain is a tax investment expert can be reached at [email protected]

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Find out which lender offers the best rate for gold loans


The demfor gold loans has been strong amid the covid-19 crisis. Many small business owners families affected due to the pandemic resorted to gold loans as they are an easy form of credit. Lenders don’t evaluate the borrower’s credit profile repayment capacity.

The interest on gold loans varies, ranging between 7% 29%. Banks offer loans at lower interest rates than non-banking financial companies (NBFCs). For example, Punjab & Sind Bank offers gold loans at 7.00-7.50%, Canara Bank at 7.35% Punjab National Bank at 8.75-9.00%, according to data from

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Among NBFCs, IIFL Finance offers gold loans at 9.24- 24.00%, Manappuram Finance at 12.00-29.00% Muthoot Finance interest rates are up to 29%.

To understhow interest rates can impact your loan, let’s look at an example taking the lowest the highest interest rate that IIFL Finance offers. A borrower takes a 2 lakh gold loan for one year. At 9.24% interest rate, the borrower will need to pay 10,151 as interest cost. However, at 24%, the interest outgo will be 26,943.

In gold loans, interest rates are an essential factor to consider as they vary widely. However, borrowers should look at other factors, too. For example, many lenders, like Punjab & Sind Bank, Canara Bank Punjab National Bank, offer gold loans for up to one year.

IIFL Finance offers it for up to 11 months only, Manappuram Finance is offering gold loans for up to three months under most of its schemes. The tenure of up to 365 days is available only in the Samadhan Plus scheme.

Some lenders, like Kotak Mahindra Bank Bandhan Bank, offer gold loans for a tenure of up to four years three years, respectively.

If you are looking for a gold loan for a longer tenure, lenders that offer lower interest rates won’t be of much help.

(Do you have personal finance queries? Send them to [email protected] get them answered by industry experts)

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Canadians with long COVID: Sick and, increasingly, worried they’ll go broke – National


Adriana Patino, 36, has been battling COVID-19 since December 2020.

First, the virus made her very sick, prompting several trips to the ER when her blood-oxygen levels had dropped dangerously low. Then the long-term symptoms set in: palpitations, difficulty breathing, overwhelming fatigue, concussion-like cognitive issues.

“I have memory issues, it takes me a while to retain information or follow up conversation or I misspell words constantly,” says the North Vancouver-based consultant.

Patino, once a competitive swimmer who represented Canada at the FINA World Aquatics Championship, says she’s been housebound for more than six months. Minor physical or mental exertions lead to debilitating exhaustion or violent headaches. Carrying out her job, she says, is impossible.

Read more:
‘I’ve progressed very, very slowly’: B.C. COVID-19 ‘long-hauler’ shares recovery story

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But while Patino says her employer has been very supportive, getting her long-term disability (LTD) insurance claim approved is taking longer than expected. Patino, who has exhausted her short-term Employment Insurance (EI) sickness benefits, says she was hoping her LTD coverage would kick in around a month after she filed the claim in early April. Instead, the insurance company keeps coming back with new requests for medical records, she says.

In the meantime, Patino says her financial situation is rapidly deteriorating. After raiding her personal savings, she had to borrow from her mother. Her friends raised funds through a GoFundMe account.

But if her workplace benefits don’t come in soon, she says she’ll have to start selling some of her possessions to make ends meet.

“We don’t have anything else to rely on,” she says.

Click to play video: 'Millions continue relying on COVID-19 benefits'

Millions continue relying on COVID-19 benefits

Millions continue relying on COVID-19 benefits – Mar 15, 2021

More than half of COVID-19 patients might be suffering from long-term symptoms more than 12 weeks after testing positive, according to a new review by the Public Health Agency of Canada. To date, 1.39 million Canadians have contracted the virus survived, according to official statistics.

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But many of the country’s COVID long-haulers say they’re falling through the cracks of both private workplace insurance benefits government income supports.

Workplace disability benefits often denied

Only 12 million Canadians have disability insurance, according to the Canadian Life Health Insurance Association. But even those who, like Patino, have coverage, aren’t necessarily able to access the benefits when they suffer from long-term COVID symptoms, also known as long COVID.

The lingering effects of the virus manifest as a bewildering array of symptoms. The common ones include fatigue, difficulty breathing, cognitive problems often described as “brain fog,” cough, muscle pain or headache, sleep problems, cardiac issues trouble sleeping.

Read more:
Canadians with lifelong disabilities can lose disability tax credit

The pandemic is leaving millions of COVID-19 survivors chronically ill, creating what science magazine Scientific American recently called a “tsunami of disability.”
But long COVID has all the hallmarks of an illness for which it’s difficult to claim workplace disability benefits. What’s causing those often debilitating symptoms doesn’t always show up in diagnostic testing. Patino, for example, says she has undergone a barrage of tests, most of which came back normal. Only a few tests revealed issues with her lungs, blood heart, she says.

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Click to play video: 'COVID-19 ‘long-haulers’ describe shakes, trouble breathing weeks after testing positive'

COVID-19 ‘long-haulers’ describe shakes, trouble breathing weeks after testing positive

COVID-19 ‘long-haulers’ describe shakes, trouble breathing weeks after testing positive – Feb 19, 2021

Also, researchers still have a limited understanding of COVID’s long-term effects family doctors often don’t recognize the condition. A recent study in the British Journal of General Practice, for example, suggested that general practitioners in Englmay be grossly under-diagnosing long COVID. Researches found less than 24,000 records of formal diagnoses of long COVID, a number that is nearly 100 times smaller than the two million adults thought to have had long COVID in England.

“It’s an invisible illness, it’s much like … chronic fatigue syndrome, (that is) myalgic encephalomyelitis,” says Susie Goulding, a floral designer based in Oakville, Ont. She’s a COVID long-hauler who founded COVID Long-Haulers Support Group Canada, which has almost 14,000 members.

Read more:
These Canadians say they suffered COVID-19 symptoms for months

Many COVID long-haulers in the group have been denied long-term disability benefits, she says.

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“People are being turned away because they just can’t prove it in black white on paper that they are as ill as they are saying that they are,” she says.

Because there is still little research around long COVID, it’s easy for insurance companies to dismiss disability claims due to “insufficient medical evidence,” says Nainesh Kotak, a Mississauga, Ont.-based disability personal injury lawyer, who has recently been retained for a long COVID case.

Read more:
‘We were counting pennies’: When disability insurance won’t pay because doctors can’t tell what’s wrong

“It’s no different than dealing with a chronic fatigue case or even a chronic pain case. What is more difficult, though, is certainly the newness of the impairments,” he says.

It’s important for long COVID sufferers to build medical evidence by relying on their family physician to record their symptoms provide referrals to specialists as needed, Kotak says.

“The important thing, of course, is to have your physicians as an ally,” he notes.

But that’s often a challenge for long-haulers in Canada, where not everyone has access to a family physician. The head of the Canadian Medical Association recently called on the federal government to boost access to family doctors for long-haulers.

Click to play video: 'The struggles of COVID-19 ‘long-haulers’'

The struggles of COVID-19 ‘long-haulers’

The struggles of COVID-19 ‘long-haulers’ – Oct 20, 2020

In the absence of that, long-haulers should consistently use the same walk-in clinic for appointments, which makes it easier to gather evidence, Kotak says.

But besides providing a full picture of long COVID patient’s symptoms, it’s key that doctors identify how the condition limits the patients’ ability to function in their jobs, he adds.

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Still, it doesn’t help that, unlike the U.K., Canada has yet to establish a clinical definition of long COVID.

And some long-haulers face yet another mystifying obstacle: they can’t prove they ever had COVID-19.

Read more:
Cancer patient was cut off from work disability benefits for 10 months — his story has warning for everyone

Many long-haulers who caught the virus in the first wave, when Canada was rationing a limited number of available tests, don’t have a positive COVID-19 test result to show for it, Goulding says. For example, many COVID-19 symptomatic patients weren’t given tests if a family member had already tested positive, she adds.

“They were assumed to have a positive case as well, but then they didn’t get a positive … test, so then they’re left trying to prove themselves,” she says.

In a recent survey of more than 1,000 COVID long-haulers in Canada by Goulding’s COVID Long-Haulers Support Group Canada, Viral Neuro Exploration Neurological Health Charities Canada, less than 60 per cent of participants said they had received a positive test.

COVID government-benefits safety net not enough for long-haulers

For those who don’t have or can’t access long-term disability benefits, there’s little in the way of a social safety net.

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Chantal Renaud says she began suffering from crippling symptoms, including severe difficulty breathing, tachycardia profound fatigue in April 2020. When her LTD insurance claim was rejected, she says she accessed EI sickness benefits. But after exhausting the 15-week maximum eligibility period for the program, she says she found herself without any income.

In the end, Renauld says she was forced to sell her house to survive financially.

“I have financially contributed to this country for more than 32 years I should never have lost my house because I fell ill,” Renaud recently told the House of Commons’ Human Resources committee. “No Canadian should ever have to experience that.”

Read more:
On East Coast, exhausted COVID-19 ‘long haulers’ hope specialized clinics will emerge

Renaud had been called to testify about Bill C-265, a private member’s bill sponsored by Bloc Quebecois MP Claude DeBellefeuille proposing to extend the maximum period for receiving benefits to 50 weeks.

Federal budget legislation recently extended the maximum number of weeks for receiving EI sickness from 15 to 26, but the changes are expected to take effect only in the summer of 2022.

The office of Human Resources Minister Carla Qualtrough did not respond to a question about whether the federal government is considering a further extension of the maximum benefits period.

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“The Government of Canada recognizes that this continues to be a difficult time for many workers in Canada. We will continue to monitor how the labour market rebounds the needs of Canadians as we move forward on the path to recovery,” Employment Social Development Canada said via email.

Patino, for her part, says she’s hoping her story helps people policymakers appreciate the impact of long COVID.

“I want people to take this seriously I want the government to take us seriously.”

© 2021 Global News, a division of Corus Entertainment Inc.


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Can I keep my EPF account operational earn interest post-retirement?


I retired at age of 64 years in March 2019. I kept my employees’ provident fund (EPF) account operational without any additions. The three-year period allowed to keep the account open without additions ends on 18 March 2022.

I have the following queries:

1) Can I extend my EPF account beyond three years without any additions to the account?

2) I need to close the account on 18 March 2022. In this case, how will the interest for the 2021-22 period get credited to my account, as the rate of interest is generally decided in April, my account would close a month before that?

3) When do I submit an online application for account closure — on 18 March 2022 or before that date?

– Anonymous

As per the existing provisions under the Indian Provident Fund (PF) law, an EPF account becomes ‘inoperative account’ does not earn further interest, once an employee retires from service after attaining the age of 55 years, migrates abroad permanently or dies does not apply for withdrawal of his accumulated balance within 36 months.

Until then, interest will continue to accrue on the PF balances, however, no interest will accrue once the account becomes inoperative.

In your case, as you have retired after completing 55 years of age, you shall receive interest up to 36 months from the date of your retirement. It may be noted that post completion of the above referred 36 months, it is not mandatory to close your PF account. You can keep the account open.

You may choose to make an application for withdrawal of the PF balance in your account at your convenience even after 18 March 2022.

Further, just to clarify, in case you choose to apply for the PF withdrawal in March 2022 the PF authorities have not announced the interest rate for FY 2021-22, you shall receive the interest up to the date of withdrawal, as per the last announced PF interest rate.

(Parizad Sirwalla is partner head, global mobility services, tax, KPMG in India.)

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SBI vs HDFC Bank vs ICICI vs Axis Bank


A fixed deposit (FD) is an investment product offered by banks. State Bank of India (SBI), ICICI Bank, HDFC Bank Axis Bank offer FD tenures ranging from 7 days to 10 years. FD interest rates of different banks vary by deposit amount, deposit tenure type of depositor. So, before parking your money in a term deposit it’s always better to compare the interest rates offered by various banks.

SBI latest FD rates

SBI FDs between 7 days to 10 years will give 2.9% to 5.4% to general customers. Senior citizens will get 50 basis points (bps) extra on these deposits. These rates are effective from 8 January 2021.

7 days to 45 days – 2.9%

46 days to 179 days – 3.9%

180 days to 210 days – 4.4%

211 days to less than 1 year – 4.4%

1 year to less than 2 years – 5%

HDFC Bank latest FD rates

HDFC Bank offers interest ranging from 2.50% to 5.50% on deposits maturing between 7 days 10 years. These rates are effective from 21 May 2021. HDFC Bank offers interest rates from 3% to 6.25% on FDs maturing in 7 days to 10 years to senior citizens.

7 – 14 days 2.50%

15 – 29 days 2.50%

30 – 45 days 3%

61 – 90 days 3%

91 days – 6 months 3.5%

6 months 1 day – 9 months 4.4%

9 months 1 day < 1 Year 4.4%

1 year – 4.9%

1 year 1 day – 2 years 4.9%

2 years 1 day – 3 years 5.15%

3 year 1 day- 5 years 5.30%

5 years 1 day – 10 years 5.50%

ICICI Bank latest FD rates

ICICI Bank gives interest rates ranging from 2.5% to 5.50% on deposits maturing in 7 days to 10 years. These rates are applicable from 21 October. Senior citizens will continue to get a 50 basis points (bps) higher interest rate than others.

7 days to 14 days – 2.50%

15 days to 29 days – 2.50%

30 days to 45 days – 3%

46 days to 60 days – 3%

61 days to 90 days- 3%

91 days to 120 days – 3.5%

121 days to 184 days – 3.5%

185 days to 210 days – 4.40%

211 days to 270 days – 4.40%

271 days to 289 days – 4.40%

290 days to less than 1 year – 4.40%

1 year to 389 days – 4.9%

390 days to < 18 months – 4.9%

18 months days to 2 years – 5%

2 years 1 day to 3 years – 5.15%

3 years 1 day to 5 years – 5.35%

5 years 1 day to 10 years – 5.50%

Axis Bank FD rates

Private sector lender Axis Bank offers an interest rate of 2.50% to 5.75% on term deposits maturing in 7 days to 10 years. These rates are with effect from 26 June 2021.

7 days to 14 days 2.50%

15 days to 29 days 2.50%

30 days to 45 days 3%

46 days to 60 days 3%

61 days < 3 months 3%

3 months < 4 months 3.5%

4 months < 5 months 3.5%

5 months < 6 months 3.5%

6 months < 7 months 4.40%

7 months < 8 months 4.40%

8 months < 9 months 4.40%

9 months < 10 months 4.40%

10 months < 11 months 4.40%

11 months < 11 months 25 days 4.40%

11 months 25 days < 1 year 4.40%

1 year < 1 year 5 days 5.10%

1 year 5 days < 1 year 11 days 5.15%

1 year 11 days < 1 year 25 days 5.10%

1 year 25 days < 13 months 5.10%

13 months < 14 months 5.10%

14 months < 15 months 5.10%

15 months < 16 months 5.10%

16 months < 17 months 5.10%

17 months < 18 months 5.10%

18 Months < 2 years 5.25%

2 years < 30 months 5.40%

30 months < 3 years 5.40%

3 years < 5 years 5.40%

5 years to 10 years 5.75%

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