National Pension Scheme
NPS is a pension scheme introduced by Central Government. It is a plan to accumulate a pension corpus during work life for a secured retired life. Retirement planning ranks high amongst the various life goals.
NPS is a pension scheme introduced by Central Government. It is a plan to accumulate a pension corpus during work life for a secured retired life. Retirement planning ranks high amongst the various life goals.
The Union budget 2015-16 has made National Pension System (NPS) more attractive by announcing an exclusive deduction of Rs. 50,000 for under section 80CCD (1B) over and above the limit of Rs. 1,50,000 currently available under section 80C of the Income Tax Act. What’s more! 40% of lump sum withdrawal on attainment of 60 years of age is tax-exempt as announced in Union budget 2016-17.
| Section | Particulars | Max. deduction under relevant section | Mar, 2021Cumulative maximum deduction u/s 80CCE | Tax Treatment under NPS |
|---|---|---|---|---|
| 80C | Deduction towards various contribution or payments (like Life insurance Premium, annuity, PF, subscription to equity shares or debentures, NSC, ULIP, Fixed Deposits, Mutual Funds, Housing Loan Repayment etc) | Rs. 150,000 | Rs. 150,000 | 40% of accumulated wealth withdrawn as lump sum from NPS Tier 1 account on attaining 60 yrs of age is tax-exempt |
| 80CCC | Deductions towards Pension Fund | Rs. 150,000 Employed: 10% of Basic Salary | Rs. 150,000 | Minimum 40% of accumulated wealth to be invested in annuity. Investment in Annuity is tax-exempt |
| 80CCD(1) | Contribution towards NPS (Tier 1 account) | Self-employed person : 20% of Gross total income | - | Pension received through investment is Annuity is considered as income for that FY and shall be taxed basis prevailing tax laws |
| 80CCD(1B) | Contribution by any individual to NPS (Tier 1 account) | Rs. 50,000 | Not Applicable | |
| 80CCD(2) | Employer's contribution towards NPS (Tier 1 account) | 10% of Basic Salary | Not Applicable |
Partial withdrawal (not exceeding 25% of own contribution of subscriber who has been in NPS for at least 3 yrs) made in accordance with the terms and conditions specified under Pension Fund Regulatory and Development Authority Act and regulations is tax-exempt