What are the main differences between the New NISA and Old NISA?
Hello! I see someone asking about the differences between the old and new NISA. Let me break it down for you in simple terms, hoping to help you quickly grasp it.
Simply put, the new NISA, starting in 2024, is a 'super deluxe upgrade' of the old NISA. It transforms an already decent tax-exemption system into something even more user-friendly and powerful for ordinary people.
If you don't want to read a lengthy explanation, you can start with the summary table below for a quick overview:
| Feature | Old NISA (2023 and prior) | New NISA (starting 2024) | Interpretation of Changes |
|---|---|---|---|
| System Duration | Fixed term (ended 2023) | Permanent | You can now plan it as a lifelong investment account! |
| Tax-Exempt Holding Period | Tsumitate NISA up to 20 years, General NISA up to 5 years | Unlimited | Tax-exempt no matter how long you hold it, completely eliminating the '5-year itch'. |
| Annual Investment Limit | Choose one per year:<br>- Tsumitate NISA: ¥400,000<br>- General NISA: ¥1,200,000 | Both can be used concurrently:<br>- Tsumitate Investment Quota: ¥1,200,000<br>- Growth Investment Quota: ¥2,400,000<br>(Total annual maximum ¥3,600,000) | You can invest several times more money each year! |
| Lifetime Tax-Exempt Limit | No such concept, quota was used up permanently | ¥18,000,000 | Provides you with a huge tax-exempt 'total pool'. |
| Quota Reusability | No, quota not restored after selling | Yes! The quota for the sold portion is restored the following year | This is the biggest highlight! Funds become super flexible. |
| Account Type | Choose between "Tsumitate" and "General" each year | "Tsumitate Investment Quota" and "Growth Investment Quota" can be used simultaneously | You can both passively invest and seize opportunities to buy stocks, without compromising either. |
Below, I'll explain a few of the most important changes in detail:
1. From 'Limited-Time Offer' to 'Permanent Benefit' (System Permanence)
The old NISA was like a limited-time promotional offer; you always had to worry about 'what happens when it expires?' or 'should I roll it over?', which was quite troublesome.
The new NISA makes the system permanent. This means you can confidently make very long-term investment plans, such as preparing for retirement 20 or 30 years from now, without worrying about the system suddenly disappearing.
2. A Fatter Wallet (Significantly Increased Quotas)
With the old NISA, you could invest a maximum of ¥400,000 annually (Tsumitate) or ¥1,200,000 (General), and you could only choose one.
The new NISA is much more generous:
- Tsumitate Investment Quota: ¥1,200,000 annually. Primarily for investing in lower-risk public investment trusts, etc.
- Growth Investment Quota: ¥2,400,000 annually. Can be used to buy stocks, funds, etc., offering more flexibility.
You can use both of these quotas simultaneously, allowing you to invest up to ¥3,600,000 per year, which is several times more than before. Of course, you don't necessarily have to invest the full amount; just invest according to your own circumstances.
3. Introduction of a 'Reusable' Lifetime Quota (¥18,000,000 & Quota Restoration)
This is the most revolutionary aspect of the new NISA!
- ¥18,000,000 Lifetime Quota: Each person has a total tax-exempt investment quota of ¥18,000,000 for their lifetime. As long as the principal you invest in NISA does not exceed this amount, the profits generated will be tax-exempt forever.
- Quota can be 'restored': What does this mean? Let's take an example:
- Suppose you invested ¥3,000,000 into your new NISA account this year. Your ¥18,000,000 lifetime quota would then have ¥15,000,000 remaining.
- Two years later, you urgently need money for a house purchase and sell off your entire ¥3,000,000 investment (which, with profits, might have grown to ¥3,500,000).
- Under the old system, this ¥3,000,000 quota would be permanently lost. However, with the new NISA, the quota corresponding to the ¥3,000,000 principal you sold will be 'restored' the following year, and your lifetime quota will revert to ¥18,000,000!
This design significantly improves fund liquidity. You no longer have to worry about permanently losing valuable tax-exempt quotas due to temporary sales, allowing you to respond more flexibly to various financial needs in life.
4. Both 'Passive Investing' and 'Stock Trading' are Possible (Concurrent Use of Both Quotas)
Previously, you had to deliberate each year: should I choose the stable Tsumitate NISA, or the flexible General NISA?
Now, there's no need to hesitate. The two quotas of the new NISA can be used simultaneously. You can use the 'Tsumitate Investment Quota' to consistently buy funds monthly, achieving steadfast long-term savings; while keeping the 'Growth Investment Quota' available to act whenever you spot a desirable stock or market opportunity.
In Summary
Overall, the core design of the new NISA is to encourage long-term investment, simplify rules, and increase flexibility. It addresses almost all the pain points of the old NISA, making it easier for ordinary people to participate in investments and enjoy tax-exempt benefits.
If you previously hesitated because you found the old NISA rules too complex, then the new NISA is definitely an excellent time to start learning about and engaging in investment and financial planning.
Hope this explanation helps you!