National Pension Scheme
The National Pension System is a retirement saving scheme launched by the Government of India through which you can voluntarily invest your money on a regular basis to build a retirement corpus. NPS is a low-cost investment solution that lets you invest across asset classes and offers a host of tax benefits for, both, individuals (under Section 80C and Section 80CCD) and corporates.
Features and Benefits of NPS
Dual benefit up to Rs. 50,000 u/s 80CCD(1B) over & above the Rs. 1,50,000 u/s 80C (old tax regime)
Start investing as low as Rs. 500 per transaction and Rs. 1000 per year.
Switch between equity, corporate debt, Govt bonds & alternate funds (twice a year) & there is no upper limit.
Early & partial withdrawals are available. Get lumpsum payment + monthly pension on maturity.
All Indian citizens aged between 18-65 years can invest in this central government pension scheme. NPS is portable across jobs and geographies.
Tax Benefits for Individual Subscribers
- Claim up to Rs.50, 000 tax deduction u/s 80CCD (1B) over and above the limit of 80CCE (under old tax regime)
- Individuals are also eligible for tax exemption for contributions of up to 10% of basic salary u/s 80 CCD (1A) within Rs.150, 000 limit u/s 80 CCE (under old tax regime)
- For the self-employed taxpayers, the tax- exempt contribution limit is 20% of the gross income with the maximum limit being capped at Rs. 1,50,000/- for a given financial year (under old tax regime)
Corporate NPS is available for Public and Private sector companies and is offered as an employee benefit along with Provident Fund, Gratuity, Superannuation or any other Pension Schemes.
Tax Benefits for Corporate Employees
- Claim up to Rs.50, 000 tax deduction on employee contribution u/s 80CCD (1B) over and above the limit of 80CCE (under old tax regime)
- Employer’s contribution of up to 10% of Salary (Basic + Dearness Allowance) is deductible from taxable income under section 80CCD (2) within Rs.150, 000 limit under section 80 CCE (under old tax regime)
Please note: If the aggregate contribution made by an employer to an employee’s Provident Fund, NPS and an approved Super Annuation fund in a financial year exceeds Seven Lakh and Fifty Thousand Rupees, the excess amount will now taxable at the hands of the employee
Tax Benefits for Corporate Employeer
Corporates can avail of tax benefit u/s 36 (i) (IV) of Income Tax Act, 1961, on employer’s contribution towards NPS; up to 10% of salary (Basic + DA) can be deducted as ‘Business Expense’ from their Profit & Loss Account