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<ul><li>LIC is one of the few profit making companies that the government owns.</li><li>The value of LIC’s investment corpus is an all-time high of ₹31 lakh crore.</li><li>It has 250 million customers – which is a lion’s market share in a poorly insured country like India.</li></ul>The government just announced what is likely to be the biggest initial public offering (IPO) in the next financial year, the one from Life Insurance Corporation of India (LIC), which at least is half a century old. After delays and disinterest in the government’s plan to sell stakes in its debt-laden companies like Air India, now the Indian government wants to unlock value in Life Insurance Corporation (LIC). This Navratna company is one of the few profit making companies that the government owns, and has always been a vital part of the government’s investment plans. LIC is the oldest insurance company and also the largest financial institution of the country -- with a massive investment corpus of ₹31 lakh crore. Any value unlocking from this massive company will be able to fill the government’s coffers also make up for its rising fiscal deficit – the difference between its revenue collections and earnings. To put it in perspective, India’s fiscal deficit is at around ₹9 lakh crore which is more than thrice the value of LIC’s stock holdings only. If its insurance business and its extensive coverage across the country is included, the value of this unlisted company would rise massively. It has 250 million customers – which is a lion’s market share in a poorly insured country like India. LIC asset value at an all-time high The timings too is no coincidence since LIC’s asset value is currently at an all-time high. In fact, the value of LIC’s stock holding is 20% of total market value of Indian stock markets. In the very last month, it booked a profit of ₹14,000 crore only from its stock market holdings for the eight months between April and November, says a<a href="https://indianexpress.com/article/business/companies/lic-makes-over-rs-14000-crore-profit-from-markets-till-mid-nov-this-fiscal-6144766/"> report by Indian Express</a>. This, was in spite of the fact that LIC always bows down to government’s dictates to invest in government divestment programmes and initial public offers of state-owned companies. Foreign investor interest The insurance sector has been always been one of the most attractive sectors for foreign players. But it has hit an all-time high late last year, probably buoyed by the interest of millennials in insurance that opens a new vista of opportunities for the sector. In the last one year, the exposure of foreign inflows into the sector rose 10-fold. By the end of November 2019, foreign portfolio investments in insurance stocks were at $10.5 billion. In October 2018, they were at around a billion dollars. Both LIC’s asset value and the value of insurance in general might land a windfall for Indian government. That might save it from a sorry state that many of its company are in – high-debt and assets which are unsold. See also: <a href="https://www.businessinsider.in/budget/income-tax/news/check-out-new-income-tax-slab-of-2021/articleshow/73830824.cms">New income tax slabs 2020</a> <a href="https://www.businessinsider.in/budget/news/there-will-be-no-manual-cleaning-of-sewers-anymore-announces-nirmala-sitharaman/articleshow/73835265.cms">“There will be no manual cleaning of sewers anymore,” announces Nirmala Sitharaman</a>

The biggest IPO of the next financial year ⁠— LIC, whose corpus is at ₹31 lakh crore

Listing of <keyword id="6365973" type="COMPANY" weightage="20" keywordseo="life-insurance-corporation">Life Insurance Corporation</keyword> (LIC) and sale of government's stake in IDBI Bank may be delayed beyond March 2021, due to depressed valuation amid COVID-19 pandemic. The government aims to garner Rs 90,000 crore from the listing of LIC and stake dilution in IDBI Bank out of total the disinvestment target of Rs 2.10 lakh crore during the current fiscal. Finance Minister Nirmala Sitharaman while presenting the Budget 2020-21 had announced stake sale in LIC through an initial public offer in the current financial year. <div type="Youtube" id="WYbWln2KsuA" title="Budget 2020: LIC to get Privatised" thumbUrl="https://i.ytimg.com/vi/WYbWln2KsuA/mqdefault.jpg"></div> Given the prevailing market situation, it seems to be difficult to do the LIC stake sale in the current fiscal as the situation is not conducive, sources said. Besides, they said, there will not be a matching appetite for the mega issue of LIC in the present market condition. Due to COVID situation, the government recently for the second time extended the deadline for bidding for privatisation of India's second-biggest oil marketing company Bharat Petroleum Corp Ltd (BPCL) by over a month to July 31. The government currently owns 100 per cent in LIC, while it holds around a 46.5 per cent stake in IDBI Bank. The sources said, the government will have to cut down its expected realisation from stake dilution of both LIC and IDBI Bank even if the market condition improves. So, selling them at low valuation would be an imprudent decision, they added. Besides valuation, the sources said, listing of LIC involves a lot of regulatory clearances and more importantly amendment to the LIC Act itself. Market participants had already termed the listing of insurance behemoth LIC as IPO of the decade akin to the Saudi Aramco listing. The 60-year-old state-owned firm, LIC is the country's largest insurer, controlling more than 70 per cent of the market share. The insurer has a market share of 76.28 per cent in number of policies and 71 per cent in first-year premiums. LIC has many subsidiaries, including IDBI Bank. Turning the corner, IDBI Bank on Saturday posted a profit of Rs 135 crore for the March quarter on account of recoveries from bad loans. The lender reported a profit after 13 straight quarters of net losses. The bank had posted a net loss of Rs 4,918 crore in the corresponding period of last year. In January 2019, LIC completed acquisition of 51 per cent controlling stake in the lender. The state-owned life insurer infused Rs 21,624 crore into the bank. The bank, which is under the Reserve Bank of India's prompt corrective action (PCA) framework, said it has achieved all PCA parameters for exit except return on asset. SEE ALSO: <a href="https://www.businessinsider.in/budget/news/india-moves-to-unlock-value-from-insurance-behemoth-lic-whose-corpus-is-at-31-lakh-crore/articleshow/73836245.cms">The biggest IPO of the next financial year ⁠— LIC, whose corpus is at ₹31 lakh crore</a> <a href="https://www.businessinsider.in/business/news/nirmala-sitharaman-says-the-lic-ipo-will-benefit-retail-investors/articleshow/74008705.cms">Nirmala Sitharaman says the LIC IPO will benefit retail investors</a> <a href="https://www.businessinsider.in/business/news/govt-to-retain-management-control-in-lic-after-listing-sitharaman/articleshow/74459403.cms">Govt to retain management control in LIC after listing: Sitharaman</a>

India's largest-ever IPO may be shelved until next year

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<ul><li>There are over 1.600 housing projects, and 4.58 lakh housing units, that are stalled.</li><li>The Narendra Modi cabinet approved a ₹10,000 crore fund for distressed housing projects, and SBI and LIC will pool in another ₹15,000 crore.</li><li>A special window will be created and it will be structured as an alternative investment fund.</li></ul>The Narendra Modi government will provide ₹10,000 crore through a special window to revive stuck housing projects. This fund will be structured as an alternative investment fund under <keyword id="685088" type="ORGANIZATION" weightage="20" keywordseo="SBI-Cap">SBI Cap</keyword>. The country's largest bank, the State Bank of India (SBI), and the state-owned insurer, the Life Insurance Corporation (LIC), will bring in additional funds, taking the initial corpus to ₹25,0000 crore. This will provide relief to thousands of aggrieved home buyers who have been waiting anxiously for their homes to be delivered because the builders have run out of cash. "There are over 1.600 housing projects, and 4.58 lakh housing units, that are stalled," <keyword id="7706673" type="UNKNOWN" weightage="20" keywordseo="finance-minister-nirmala-sitharaman">Finance Minister Nirmala Sitharaman</keyword> said as she unveiled the latest decision by the Union Cabinet. Even projects that have defaulted on loans will be eligible, contrary to expectations in the run up to the decision. "Any project that has not been sent for liquidation by the bankruptcy court are also eligible" Sitharaman said. The fund is largely targeting middle and low income housing projects whose net worth is in the positive. <div type="Article" hostid="261" msid="71942852" title="Know if the home that you are waiting for can avail money from Indian government's new fund for stuck housing projects" mstype="2" mssubtype="0"></div>

 "80% of all stuck housing projects will benefit from this announcement," Samir Jasuja of PropEquity told a television channel. According to Jasuja, out of the 4.8 lakh housing units, nearly 3 lakh units are either in the national capital region around New Delhi or in the Mumbai Metropolitan region. 
 
 
 
 
 
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 The fund provided to developers will be kept in an escrow account— the money cannot be used by the developer for anything other than the construction of the project itself, nor can the bank use the money to recover earlier dues, the minister clarified. The calculation of net worth will be specific to the project, not at the company level. "If there are three towers in a project, and one of them is 70% is complete, and the other two haven't started yet. The money will be available only for the tower that is 70% complete not for the other two," Sitharaman explained. For instance, if the project needs ₹400 crore for completion, the money will be released to the escrow account based on milestones in completion. The real estate sector has already welcomed the decision when it was being discussed as a possibility. Finance Minister Nirmala Sitharaman also said that the government is inviting other foreign funds and sovereign funds to invest in the fund, over and above the initial ₹25,000 crore from the government of India, SBI and LIC. "I rather retrieve projects that are awaiting resolution at the NCLT (National Company Law Tribunal), get them out of there," Sitharaman said explaining the structure of the rescue fund. SEE ALSO: <a href="https://www.businessinsider.in/policy/economy/news/not-just-slowdown-indian-homes-sales-are-brought-down-by-shraadh-custom-and-heavy-rains/articleshow/71375256.cms" data-type="tilCustomLink" target="_blank">Not just slowdown, Indian homes sales are brought down by 'Shraadh' custom and heavy rains</a> <a href="https://www.businessinsider.in/luxury-housing-rebounds-in-india-with-almost-three-times-more-launches-after-two-years/articleshow/70584923.cms" data-type="tilCustomLink" target="_blank">Luxury housing rebounds in India with almost three times more launches after two years</a>

Indian government unveils $3.5 billion rescue fund for stuck housing projects

<ul><li>Both Sensex and <keyword id="6354813" type="UNKNOWN" weightage="20" keywordseo="Nifty">Nifty</keyword> declined nearly a percent and half as Finance Minister Nirmala Sitharaman read her budget speech.</li><li>Markets were hoping for a big stimulus from the government to revive the economic growth which has hit a six and a half year low. </li><li>Changes to income tax slabs, passing of the tax on corporate dividends, liberalisation of education sector, the IPO of LIC, extended tax holiday for affordable housing were among the big proposals.</li></ul>India's <keyword id="35199" type="PERSON" weightage="20" keywordseo="stock-markets">stock markets</keyword> were unusually open on a Saturday, in anticipation of an 'economic stimulus', but as Finance Minister Nirmala Sitharaman went through with her speech, both Sensex , down nearly 700 points, and Nifty that was down about 220 points at 2:30 pm. Changes to income tax slabs, passing of the tax on corporate dividends, liberalisation of education sector, extended tax holiday for affordable housing, and the initial public offering of Life Insurance Corporation (LIC) were among the big proposals. However, the stock market did not seem very excited with the minister's proposals. "Investors stayed away from taking fresh positions ahead of the big event. Focus will turn to the Union Budget as all eyes will be on how Centre is going to bring growth as any increase in spending would result in widening of fiscal deficit. Global economy is also on the edge with slow growth fears significantly high after the outbreak of the virus," Vinod Nair, head of research at Geojit Financial Services told IANS earlier in the day. Insurance stocks like HDFC Life, ICICI Prudential, and SBI Life took a heavy beating, down anywhere between 5% and 8%, after the budget proposed the listing of LIC ⁠— the country's largest insurance giant with a corpus of ₹31 lakh crore⁠— that is likely to corner a lot of interest from investors. Technology stocks were propped up as the early part of Sitharaman's speech gave a lot of thrust to leveraging technology in a whole host of sectors from health and education to quantum computing and gene mapping. Even stocks like HUL, Asian Paints, and Bajaj Finance, which started the day on buoyant note hoping for sharp cuts in income tax and a boost for consumption including housing, gave up the early gains as the tax cuts proposed by the budget can be availed only if the taxpayer gives up on exemptions. <table style="border-width: initial; border-style: none; width: 468pt; table-layout: fixed;"></colgroup></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Income </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Previous Tax Rate </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">New Tax Rate </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Up to ₹2.5 lakh </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Nil </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Nil </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹2.5 lakh to ₹5 lakh </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">5% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Nil </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹5 lakh to ₹7.5 lakh </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">20% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">10% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹7.5 lakh to ₹10 lakh </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">20% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">15% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹10 lakh to ₹12.5 lakh </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">30% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">20% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹12.5 lakh to ₹15 lakh </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">30% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">25% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Abover ₹15 lakh </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">30% </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">30% </td></tr></tbody></table> While Sitharaman said that a person earning up to ₹15 lakh a year can save up to ₹78,000 a year in taxes, if they give up on exemptions. These are some of the big highlights that are relevant to the share market: Cost to the exchequer ₹40,000 crore; Removed 70 tax exemptions and deductions. These new rates are available to those who forego exemptions, deductions, and rebates. Dividend distribution tax will be abolished, it will be taxable in the hands of the recipient. Cost to exchequer: ₹25,000 crore. ""The decision to remove dividend distribution tax was much-needed as it was resulting in triple taxation of corporate earnings. The shift to a simplified scheme of personal income tax is another welcome move as it removes distortionary influences in the individual’s savings choices even though the actual tax savings may not be significant for those who were availing deductions and exemptions," VP Nandakumar, MD &amp; CEO of Manappuram Finance Limited said. However, the stock of the company fell over 3.2% in trade. Shares of IDBI Bank surged as much as 17% after the Finance Minister said that the government will sell its remaining 47% stake (as of December 2019) in the bank. LIC owns 51% stake in IDBI Bank, the unlocking of value will make the insurance giant's IPO even more valuable. Zeal Aqua (up 14.4%), Waterbase (up 5.58%), Apex Frozen (up 4.55%), Avanti Feeds (up 2.93%) and Coastal Corporation (up 2.66%) gained due to a dedicated push for the fishing industry. Sitharaman said that the fish production will be increased 200 lakh tonnes a year and set a target of ₹1 lakh crore in fish exports. The education sector has been allowed to borrow money from abroad as well as to invite foreign students via a new entrance examination called the INDSAT. Shares of Navneet Education (up 2.33%), Zee Learn (up 2.19%), Career Point (up 1.98%) and MT Educare (up 1.97%), gained in trade. The speech discouraged the use of chemical fertilisers, and promote organic farming, dragging down stocks like Rashtriya Chemical Fertilisers. The ₹2.83 lakh crore allocation for agriculture, irrigation, and rural development did little to stokes of a revival in rural demand. Dividend distribution tax will be taxable in the hands of the recipient and not the company. This will cost 25,000 crore to the exchequer. Dividend and capital gains made by foreign funds on investment in infrastructure space will tax free. The budget also proposed to set up a 100 new airports in the next five years but stocks of airport construction majors like GMR Infra and GVK were down nearly 5% in afternoon trade. SEE ALSO: <a href="https://www.businessinsider.in/personal-finance/news/new-income-tax-slab-tax-savings-for-salaried-people/articleshow/73835816.cms">You'll save ₹78,000 more under new income tax slabs if you earn less than ₹15 lakh</a> <a href="https://www.businessinsider.in/budget/news/indian-government-infuses-22000-crore-in-power-and-renewable-proposes-freedom-to-choose-supplier/articleshow/73835587.cms">Indian government infuses ₹22000 crore in power and renewable, proposes freedom to choose supplier</a> <a href="https://www.businessinsider.in/budget/income-tax/news/check-out-new-income-tax-slab-of-2021/articleshow/73830824.cms">New income tax slabs 2020</a> <a href="https://www.businessinsider.in/budget/news/there-will-be-no-manual-cleaning-of-sewers-anymore-announces-nirmala-sitharaman/articleshow/73835265.cms">“There will be no manual cleaning of sewers anymore,” announces Nirmala Sitharaman</a> <a href="https://www.businessinsider.in/budget/news/union-budget-2020-live-updates-news-and-highlights/liveblog/73824572.cms">Union Budget 2020 Live Updates</a>

Indian markets aren’t excited because budget does not have the ‘stimulus’ they had hoped for

<ul><li>The Pension Fund Regulatory and Development Authority (PFRDA) has recommended increasing the tax benefits under the <keyword id="475509" type="ORGANIZATION" weightage="20" keywordseo="National-Pension-System">National Pension System</keyword> from ₹50,000 to ₹1 lakh. </li><li>Any Indian resident between the age of 18 to 60 years can apply for an <keyword id="2649803" type="PERSON" weightage="20" keywordseo="NPS-account">NPS account</keyword> at their nearly PSU bank, select private banks or post offices. </li><li>Opening a Tier I NPS account is compulsory for all subscribers, however, they will have the option to choose between auto, active and default accounts. </li><li>NPS account holders can also choose between seven different fund managers. </li></ul> The Union Budget is around the corner and expectations are high from Finance Minister Nirmala Sitharam. Analysts forecast that she will introduce a number of measures to boost the economy — including doubling the tax benefit on the National Pension System (NPS) contributions. This will take the tax benefit from ₹50,000 to ₹1 lakh, as recommended by the Pension Fund Regulatory and Development Authority (PFRDA). Currently, any Indian resident between the age of 18 to 60 years can open an NPS account and save up ₹1.5 lakh per annum under section 80C of the Income Tax Act. This includes investments in insurance plans and other select instruments — including buying a pension plan. Additional tax benefits are available for up to ₹50,000 of self contribution under section 80CCD (1B), which is the NPS tax benefit. This is the amount that the PFRDA has recommended that the government should double. NPS has an EET status — exemption on investment, exemption on returns, but taxation on redemption. 40% of the corpus that you will get on retirement will be tax-free. Getting a Tier I NPS account — you don’t have a choice Any Indian resident between the age of 18 to 60 years old can apply for NPS, including government employees that joined prior to January 2004 — although the measure is not compulsory for them. Tier I accounts are mandatory for anyone who subscribes to NPS. Government employees have to pitch in a contribution of 10% from their basic salary and dearness allowance. The government matches that contribution. For non-government employees to open an NPS account, they have to make an initial minimum contribution of ₹500. Every year, the cumulative contribution has to add up to at least ₹6,000. For private-sector salaried employees, the company will provide two options — NPS and Employees Provident Fund. In choosing NPS, they will be subject to the same requirements as government employees. The only difference will be that the matching contribution would be provided by the employer, rather than the government. The employer’s contribution to NPS is non-taxable. Taxpayers can find it under 80CCD2 in Form 16. Tier II NPS accounts — Take it or leave it A Tier II NPS account is not mandatory. It’s a type of saving account from which subscribers can make withdrawals at any time. It’s not subject to tax exemptions and there’s no equivalent contribution by the employer or the government. In order to open a Tier II account, subscribers need to deposit a minimum of ₹1,000. Each contribution has to be a minimum of ₹250 and, at the end of the year, the account must have a minimum balance of ₹2,000. Any returns from Tier II accounts are treated the same as returns from mutual funds. How do you open an NPS account? You can open an NPS account by approaching your nearest PSU Bank, select private banks— like ICICI, Kotak, and HDFC among others — and post offices. At the bank, you will need to fill out the required NPS form and submit the relevant KYC documents. After your request is processed, the Central Record Keeping Agency will send you a Permanent Retirement Account Number (PRAN). This account number will be unique to you and can be moved from employer to employer. The minimum account opening fee is ₹500 and the fund management fee is 0.1%. Picking an account and fund managers NPS accounts are run through fund managers. These fund managers invest contributions into equity, corporate debt and government securities. Proportions vary according to market conditions and the type of NPS account you have. The equity portion is invested in index stocks — these stocks make up NIFTY and Sensex. Choice of fund managers: <ol><li>HDFC Pension Management Company </li><li>ICICI Prudential Life Insurance Company </li><li>Kotak Mahindra Asset Management Company </li><li>LIC Pension Fund </li><li>Reliance Capital Asset Management Company </li><li>SBI Pension Fund </li><li>UTI Retirement Solutions </li></ol> There are still three types of NPS accounts that you can choose from — active, auto and default. In choosing active, you will have control over how your money gets divided between different financial instruments. However, only a maximum of 50% can be allocated towards equities. In choosing an auto account, the money will be invested according to the subscriber’s age. Till the time you are 35 years old, 50% of the investment will go towards equity and 30% will be divided allocated to corporate debt. Thereafter, investment in equity will be reduced by 2% each year and investment in corporate debt will be reduced by 1%. By the time you will be 55 years old, 10% will be invested in equity, 10% in corporate debt and the other 80% will be allocated to government securities — a low-risk financial instrument. The default account comes with the least amount of risk. As much as 55% of your contribution is invested in government securities, 40% goes towards corporate debt, 15% is allocated to equities and only 5% is put into money market instruments. Government employees have no choice, but to opt for the default account. When can you finally withdraw your money? Withdrawals of up to 25% can be made after you’ve subscribed to the scheme for at least 10 years for reasons like children’s education or buying a house. You can make three such withdrawals from NPS at a gap of at least 5 years between each withdrawal. However, an exception can be made in the case of critical illness, accidents or life-threatening diseases. If you choose to retire before the age of 60 years, 80% of your corpus has to go towards annuity and up to 20% can be withdrawn. However, that amount will be taxed according to your tax slab. If you retire at 60 years of age, you can withdraw up to 60% of the corpus and will only have to pay tax on 20% of the amount. As much as 40% of the corpus still has to go towards buying annuity. Any returns on the annuity are taxed as per tax slabs. In the event of the death of the NPS account holder, the entire corpus amount is allocated to the nominee.

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The biggest IPO of the next financial year ⁠— LIC, whose corpus is at ₹31 lakh crore

Katya Naidu

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