#NPS Tier-2 account- Ambiguity on #tax treatment at the time of withdrawal of funds

Recently saw an article of Value research online about ," how one should use Tier- 2 account" of NPS as an alternate to mutual funds. 

While NPS is definitely a low-cost product, there is lot of ambiguity over taxation rules at the time of withdrawal.

For those who are not aware, NPS Tier-2 is an optional account over tier-1 which has no withdrawal restrictions like tier-1.
For investment allocation in tier -2, you can choose your investments to be in active choice mode or auto choice mode to be split across across Equity, Corporate bonds and Government bonds. (NPS Booklet)

Articles from the web on tax treatment at the time of withdrawal  of funds from Tier-2 account.
  1. Tax Treatment of Tier II Account is similar to that of Debt Mutual Fund: On taxation front, as per the views from various CAs and tax consultants, the tax treatment on proceeds from Tier II NPS account would be similar to debt mutual funds. Indexation benefits can be availed of. (source)
  2. Valueresearch article says, the taxation is the same as any other fixed income or debt alternative.
  3. Tax angle from Mint  A crucial difference between the two accounts is the tax treatment. Says Rani S. Nair, executive director, PFRDA: “Since Tier II does not have any lock-in period, it does not qualify for a tax deduction under section 80C.” However, right now, the pension regulator is divided on the tax treatment of the amount withdrawn. Says Nair: “We are yet to hear from the tax department on the tax implications.” Going by the product structure, withdrawals will attract capital gains tax. Withdrawals before one year will attract short-term capital gains that is taxed at the marginal rate (the highest tax rate on your income slab). For withdrawals after one year, you will have to pay long-term capital gains—10% for debt funds and nil for equity funds.
Some articles talk about
  • Treatment of the whole amount as "debt"- while others talk  about 
  • Separate tax treatment for withdrawal from equity and debt portion of tier-2 account. ( Tier 2 withdrawal request online on CRA NSDL provides the option of  lump sum or scheme wise withdrawal- so you can actually withdraw from Equity or Corporate or Government units specifically)
So, as another article says
The problem is the ambiguity over taxation. "There is no clarity on tax treatment of Tier II NPS returns. It is very subjective and different people have different views on the matter.
So, Lets keep our fingers crossed till any formal judgment is out. Please leave a comment ,if you have any valid input.

@shubhavilas "Stolen Hope" - Book review #Ramayana

"Stolen Hope" is the third book in the series of "The Game of Life".

After the first two wonderful books from the author in this series, this  third book also doesn't disappoint. The story pertaining to "Aranya Kanda" is well presented by the author.

The story in this book starts from Dankaranya forest and ends with Rama searching for  a suitable friend to find his "inseparable" consort Sita.

I got  a lot of information about various maharishis and history of places like Dandakaranya from this book. I dont remember to have read such details in other versions of Ramayana previously..

While presenting the story line in a lucid manner, the author has not only come out with lessons for life as usual but also brings out the concepts of Srivaishnavism/ Vishishtadvaita philosophy in a crystal clear way.


The author highlights very clearly
1.  Rama doesn't kill any one in Sita's presence because she is passion personified . ( This brings out the Karunya of "Sri").
2.  Lakshmana is offered the freedom to choose a place of residence at panchavati ( independence) by Rama . Lakshmana renounces any kind of independence and expresses that he is an eternal servant of Rama ( Seshatva) and he does things only as per his masters' wish.

The story, lessons for life and philosophy are presented so lucidly and simply- which makes this book a must read for all categories of readers. 

Jatayu not only occupies the cover page of the book but also ends up occupying your heart after you read the book.

Also, the chapter  titled "Lakshmana's diary" - deviates from the standard way of story telling of the book and puts out the proceedings through Lakshmana's heart- ( Good attempt by the author..Please read the book to know more:-))

The best learning for me from the book - " Every body has a golden deer in life " :-). so, BEWARE OF THE GOLDEN DEER!

Disclosure:- After reading the previous books , I have become an ardent fan of the author. I was super excited to receive a signed copy of  book from the author.!. 

Chennai real estate bubble has burst

This statement may be applicable to all of the metros in Chennai, but more specific to Chennai real estate-
More than first world prices quoted for worse than fourth world infrastructure!


The following is my short take on the current Chennai real estate scenario.

At the outset, if you make web enquiries or talk to a broker you may get a feel that the prices have not gone down. But the reality is different.Look at the following stories that I know of

1. Many apartments launched on the OMR almost /. 7 years ago are still not fully sold and they are not fully complete in terms of construction either ( in terms of the amenities promised).The prices quoted are almost 50% down if you adjust for inflation.

2. In a building that I know in Adyar, a new 2 BHK apartment (1100 sqft) is quoted at 1.8 crores for almost a year now. The rental yield for this price is 1.5% at the max. There is a big garbage dumping place and a sewage stream within smelling distance of this apartment. 4 of the 6 flats in this building are waiting for sale for more than a year now. ( For this price you may actually find apartments in New York, Singapore, Malaysia, Dubai or even some European countries!)

3.One of my friends who bought an apartment in the city for 51 lakhs ( 5 years ago) wanted to sell his apartment for 90 lakhs. Finally he had to settle in for 65 lakhs and he was lucky enough. This apartment was flooded till the first floor during the Chennai floods. After the floods, the price could have gone down further.

4.A suburb which was flooded ( built in a lake bed) like hell is seeing exodus of tenants while the owners are left with their house along with huge mortgage payments for the next 10, 15 years.

5. Couple of my friends are frustrated as the possession dates of their apartments have been pushed indefinitely ( from 2014->2015-> 2016 now)

2015 has seen the beginning of the down fall.With state elections coming up in 2016, a lot of money locked by politicians need to be taken out.This might also pull down the prices further.

The reality will get more apparent to all  in 2016! 

Oh my God! Look at these investment advices..

One of my friend called me to ask for my second opinion when he had these investment options offered to him.

First my friend was visiting his auditor ( Chartered Accountant) for some income tax advise. the Chartered Accountant suggested him to avail some good investment options from LIC ( pension plans).He also offered that it can be done through an LIC agent known to him.( His wife???)

Second my friend visited his bank to get a tax saving fixed deposit for his mom. The Manager of the PSU bank almost pleadingly forced him into buying a policy where he had to pay some amount annually for 5 years and after that he would get pension from the tenth year onward.

Last he visited a well known financial service provider for investing in an ELSS scheme.There he was lectured on the virtues of a pension policy from a private sector insurance provider.

In all of the cases, people were force selling him some insurance policies just for the sake of some hefty commission!

When the true RO (return on investment)was calculated for all of the schemes . it was less than savings bank interest currently being offered.

In none of the cases, the people selling these schemes were aware of the underlying securities in which the premium will be invested.

None of the parties who were selling these products had any true personal finance knowledge. All of them (except the Shattered accountant) were genuinely doing their job ( for what they were being paid for).

My friend at least had the guts to ask some basic questions and asked for a second opinion. if someone blindly makes an investment based on such random advises, they get tied to poor quality products due to their financial illiteracy.

God only can insure the investors from getting trapped by the insurance agents and insurance companies.

Happy New Year 2016 !

The best seller she wrote - Book review

This book is from Ravi Subramaniam who has published thrillers based on banking industry in the past.Similar to Ravi's other books the story revolves around a banking industry executive with an IIM background.

Here's an excerpt from the book , before the review 

The following are review comments provided by a publisher to a new author in the book.

"Suggested alterations to Shreya Kaushik's untitled book

a) Change Aditya's name to something more rustic . The name does not suit the character.
b) Detailing of locations in the book needs to be fleshed out. As of now it is very elementary. the average reader will have to be told what those locations stand for. Take a look at pages 4,89,112, and 165
c)The book is short. Can we look at adding another 15,000 words? We need to have a book of at least 200 pages. Readers will hesitate paying a good price for something less than that.
d)Reduce the gore in the rape scene. While it is very hard hitting, it might put off many.

There were a few more easy to manage points on the list................"

Now the review of the book on similar lines

1) For God's sake please stop using the name Aditya .The banking industry could have been left aside in this book.The theme is more towards publishing and a few Indian author's share this background. But some creativity could have been shown here instead of trying to resemble some real life authors and take some mileage out of it.

2) Will someone who has good writing talent and confident, with a decent background stoop so low for getting a book published ??? or to win a chairman's medal at IIM ( I don't know, The plot seems to be too weak)

3)The story can actually be written on the back of a bus ticket.( that's the reason for not talking about the story in this review) But did the author make it to 350+ pages because of the fact that readers need value for money. oh..my God. The story line is very much predictable once you read the back cover. Sanjay's conspiracy plot doesn't fly beyond a point and his ultimate motive is not very convincing..

4)All of these writers with a banking background seem to rely more on "Steamy" scenes in their book.Should really try to come out of this typecast and write something neat.

5)References to ebola, iphone backup, etc seem highly unconnected to me. Not enough research has been done to get into some interesting aspects that can keep the reader hooked.

The only thing that I liked in the book was the fact - " Indian MNC banks have to simply comply to the orders of HQ and cant quite stand to any decision made by them.( ref. closure of national bank -wealth management division in India ). Probably this is the reason that a lot of high profile bankers find time to write and eventually become full time authors.

In short , a below average book with a weak plot and a very very thin story line written with a lot of words!

I am reviewing ‘The Bestseller She Wrote’ by Ravi Subramanian as a part of the biggest Book Review Program for Indian Bloggers. Participate now to get free books!
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