What is the superannuation scheme and how much can an employee withdraw from the same?



What is the Superannuation Scheme and how much can an employee withdraw from the same? 
We all have at least heard about Employee's Provident Fund, National Pension Scheme and Public Provident Fund. In this blog, you will get to know about the Superannuation Scheme which is now widely held by employers these days.

What is the Superannuation Scheme:

 The Superannuation Scheme is also one of the retirement benefits which an employer may choose to opt for. This fund encourages the employees to stay in the company for a longer duration and also encourages the employer as this fund can be deducted as a business expense for the employer's company. One can make better investment decisions if he is aware of the superannuation corpus he has accumulated.

Particulars about the Superannuation Scheme: 

  • Max Limit: 15% of (Basic Salary + Dearness Allowance) is contributed by the employer. The employee also has an option to contribute towards this scheme but only in the case of defined contribution plans.
  • Job change effect: If you resign from a company, then you face 2 situations. Situation 1 is that the new employer also has a Superannuation Scheme and situation 2 being the new employer doesn't have the scheme available within their company. In the case of situation 1, you can easily transfer your previous balance to the new firm's scheme. In the case of situation 2, you can either withdraw the funds' corpus or stay invested until retirement and then withdraw normally.
  • Investment Process: The employer makes a contribution on the employee's behalf towards a group superannuation policy. The employer may choose to maintain the fund with its own trust or may reach out to an approved insurance company. For example LIC, ICICI, etc.
  • Payout of Returns: When you retire you have two options. One is to withdraw 1/3rd of the total corpus and get a pension from the remaining 2/3rd corpus which is in the form of an annuity. Second is that you can let the corpus be fully maintained in the form of an annuity and get a pension from the same. The pension is actually the interest you earn on your corpus balance. You can choose to withdraw the pension monthly, quarterly or annually.
  • Treatment under the tax purview: The tax percentage will be the same as your income tax slab. However, the tax needs to be paid only on the pensionable income. No tax is levied on the partial 1/3rd withdrawal or the corpus amount which is paid to the legal representative after the demise of the annuity holder.
Follow @rdhmfinance on instagram for latest updates.

Thanks for reading!
Please comment on any financial query you had like me to address. I will try to post something worthwhile. 

Coming up Next: Why you should not rely on the financial statements of a company blindly and what are some of the parameters you should focus on while analyzing financial statements?

Comments

Post a Comment

Popular posts from this blog

What is a marketing funnel and how can you implement it in your business to increase sales?

Image
What is a marketing funnel and how can you implement it in your business to increase sales? "Yo dude, you need to increase your funnel size". Today, we will understand what does this phrase mean when some entrepreneur asks you to increase your funnel size. There are various ways of marketing available to capture potential customers, some being more effective than the other. A business's objective includes selling its product or service to maximum number of customers possible in order to garner the benefit of economies of scale and increase the revenue as well as the profit. Now, coming straight to the topic, a marketing funnel is a journey of any person who is the ultimate buyer of your product or service. The marketing funnel is so important that companies like Amazon, Ford, Bigbasket and Reliance Jio also use it. Observe the image below carefully that the funnel narrows down as you go down i.e. with each level of filtering the number of potential purchasers reduce. The ...
Read more

What factors to consider when taking a health insurance?

Image
What factors to consider when taking a health insurance? The following are the factors that need to be considered when taking a mediclaim or health insurance. Pre and post expenses:  The policies usually have a time frame under which the expenses are covered. You should see for how many days prior to diagnosis of illness and for how many days post diagnosis the expenses are covered. A good policy will cover 30 days pre-illness to around 90 days post illness expenses for a claim. Premium: There are many companies that offer these insurance policies, however you will notice that the premiums for the same sum assured will vary from company to company. Therefore, you should do a prior research about the premiums and then look for where you can save money. Bed or per day room charges: There are policies that will mention that we cover the hospitalisation expenses only if you use the general ward, however, better services are provided to people with private rooms. So, read the documents ...
Read more

Top 30 things to keep in mind when trying to start your first business?

Image
Have you been thinking of starting a business, but you get bogged down by the process, then you have landed to the right article. Listed below are the top 30 things to keep in mind when trying to plan and start your dream company: Product/Service: The first and foremost thing is to decide on what you plan to sell or provide to your clients. Basically, it is the idea that you want to implement. The way successful entrepreneurs approach this aspect is to solve a mass real life problem or a mass real life convenience that people didn't know they needed. Since business is something that you plan to do for a long period of time, choose a product or service that you are passionate about. This way your work doesn't feel like work but its fun to see things coming together. Sourcing of product/service: There are two options that you can either make your own product or ask a supplier for the same, but even if you are going to make your own product, in most cases you will have to get ra...
Read more