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Partial withdrawal from NPS: How is it taxed for house construction?

Ramalingam

Ramalingam Kalirajan  |8092 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 06, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Naz Question by Naz on Feb 03, 2025Hindi
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How partial withdrawal from NPS Tire 2 account for house building construction will be taxed? Is it true that Principle/invested amount also attract tax ?

Ans: NPS Tier 2 is a voluntary savings account linked to NPS. It allows flexible withdrawals. However, the taxation rules for withdrawals are different from NPS Tier 1.

Understanding Tax on NPS Tier 2 Withdrawals
1) Entire Withdrawal is Taxable
Withdrawals from NPS Tier 2 do not get any tax exemption.

The entire amount, including the principal and gains, is taxed as per your income slab.

2) No Special Tax Benefits for House Construction
There are no separate tax exemptions for withdrawing from NPS Tier 2 for house construction.

Unlike NPS Tier 1, which has some tax-free components, Tier 2 is treated like a regular investment.

3) Principle Amount is Also Taxed
The invested amount (principal) was not taxed earlier because there was no tax benefit on investment.

However, when withdrawn, it is added to your total income and taxed as per your slab.

4) Tax Deducted at Source (TDS) May Apply
If the withdrawal amount is large, TDS may be deducted.

The withdrawn amount is still subject to final tax calculation based on your total income.

Better Alternatives for Funding House Construction
If you need funds for house construction, consider other investment withdrawals that have tax benefits.

Withdrawing from a mutual fund with long-term capital gains benefit may be more tax-efficient.

Fixed deposits may be an option, but the interest earned is taxable.

Finally
NPS Tier 2 withdrawals are fully taxable.

The entire amount, including the principal, is added to your income.

There is no special tax exemption for withdrawing for house construction.

Explore other tax-efficient sources for funding home construction.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ans: Pramod Sir, Here is, How to Predict Your Chances of Admission into NIT or IIIT or GFTI After JEE Main Results – A Step-by-Step Guide

Once the January JEE Main session results was declared, many students and JEE applicants started asking common questions about eligibility for specific institutes (NITs, IIITs, GFTIs, etc.) based on their percentile, category, preferred branch, and home state.

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Step-by-Step Guide to Check Your Admission Chances Using JoSAA Data
Step 1: Collect Your Key Details
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Your JEE Main percentile (Convert percentile into Rank withe help of a formula available in Google).
Your category (General-Open, SC, ST, OBC-NCL, EWS, PwD categories)
Preferred institute types (NIT, IIIT, GFTI)
Preferred locations (or if you're open to any location in India)
List of at least 3 preferred academic programs (branches) as backups (instead of relying on just one option)
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Go to Google and type: JoSAA Opening & Closing Ranks 2024
Click on the first search result (official JoSAA website).
You will land directly on JoSAA’s portal, where you can enter your details to check past-year cutoffs.
Step 3: Select the Round Number
JoSAA conducts five rounds of counseling.
For a safer estimate, choose Round 4, as most admissions are settled by this round.
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If you are open to all types of institutes, check them one by one instead of selecting all at once.
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It is recommended to check institutes one by one, based on your preferred locations.
Avoid selecting ‘ALL’ at once, as it may create confusion.
Step 6: Select Your Preferred Academic Program (Branch)
Enter the branches you are interested in, one at a time, in your preferred order.
Step 7: Submit and Analyze Results
After selecting the relevant details, click the ‘SUBMIT’ button.
The system will display Opening & Closing Ranks of the selected institute and branch for different categories.
Step 8: Note Down the Opening & Closing Ranks
Maintain a notebook or diary to record the Opening & Closing Ranks for each institute and branch you are interested in.
This will serve as a quick reference during JoSAA counseling.
Step 9: Adjust Your Expectations on a Safer Side
Since Opening & Closing Ranks fluctuate slightly each year, always adjust the numbers for safety.
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You can also follow a similar process for JEE Advanced cutoffs when applying for IITs.

Want to Learn More About JoSAA Counseling?
If you want detailed insights on JoSAA counseling, engineering entrance exams, and preparation strategies, check out EduJob360’s 180+ YouTube videos on this topic!

Hope this guide helps! All the best for your Son's admissions!

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