New Delhi: National Pension Scheme (NPS) is one of the most popular investment instruments in India. It offers tax benefit of up to Rs 1.5 lakh and an additional benefit of Rs 50,000 which makes it a popular investment choice.
NPS subscribers are required to make a minimum contribution of Rs 1,000 every year while the minimum deposit amount is Rs 500 per transaction.
Income Tax Act allows benefits under NPS as per the following sections:
• On Employee’s contribution: Employee’s own contribution is eligible for tax deduction under sec 80 CCD (1) of Income Tax Act up to 10% of salary (Basic + DA). This is within the overall ceiling of Rs. 1.50 Lacs under Sec. 80 CCE of the Income Tax Act.
• On the Employer’s contribution: Up to 10% of Basic & DA (no monetary ceiling) under 80CCD (2). This rebate is over and above the 80 CCE limit of Rs. 1.50 lacs.
• Voluntary Contribution: Employee can voluntarily invest an additional amount of Rs. 50,000 (or more) to the NPS Tier I account and claim a tax deduction on the same under section 80 CCD 1(B), subject to a maximum of Rs. 50,000.
Tax Benefits For Private Employees: The maximum tax deduction under Section 80C is Rs 1.5 lakh per annum. Any contribution towards an NPS tier 1 account allows you to claim an exclusive deduction of Rs 50,000.
Private sector employee contributions to the NPS Tier-II account will not get tax deductions under Section 80C but will continue to remain free from lock-in. It is worth mentioning that under the new tax regime, there is zero tax for income up to Rs 2.5 lakh; 5% for income between Rs 2.5 lakh and up to Rs 5 lakh; 10% for income between Rs 5 lakh and up to Rs 7.5 lakh; 15% for income between Rs 7.5 lakh and up to Rs 10 lakh; 20% for income between Rs 10 lakh and up to Rs 12.5 lakh; 25% for income between Rs 12.5 lakh and up to Rs 15 lakh; 30% for income above Rs 15 lakh.
Benefits to Corporate Employees
• Having a pension plan just like the Government Sector Employees.
• Flexibility to transfer from One Corporate to another corporate without changing PRAN (Permanent Retirement Account Number).
• Additional Tax Benefits up to 10% of Basic Salary + Dearness Allowance.
• Transfer of Superannuation Funds to NPS (One Time-Tax Free)
• Continue to invest in NPS till 70 years of age.
Comments are closed.