The Central Government has introduced the National Pension System (NPS) with effect from January 01, 2004 (except for armed forces). NPS was made available to All Citizens of India from May 01, 2009. Pension Fund Regulatory and Development Authority (PFRDA), the regulatory body for NPS, has appointed Protean eGov Technologies Limited as Central Recordkeeping Agency (CRA) for National Pension System. CRA is the first of its kind venture in India which will carry out the functions of Record Keeping, Administration and Customer Service for all subscribers under NPS. CRA shall issue a Permanent Retirement Account Number (PRAN) to each subscriber and maintain data base of each Permanent Retirement account along with recording transactions relating to each PRAN.
National Pension System (NPS), Regulated By PFRDA, is an important milestone in the development of a sustainable and efficient voluntary defined contribution pension system in India. It has the following broad objectives:
Tax Benefits for Self Employed & Salaried Individuals under NPS
NPS not only helps you plan for your retirement, it allows you to save tax at the same time. Whether you are looking for tax saving opportunities within 80C or beyond, NPS offers you both. Yes, that is correct!
Also, no matter whether you are self employed or working with a Corporate, NPS offers exclusive tax benefits over and above 80C limit for both. Further, if your 80C limit is not exhausted, you can still invest in NPS to avail tax benefits under 80C.
What are the tax benefits under NPS?
Tax Benefit available to Individual:
Any individual who is Subscriber of NPS can claim tax benefit under Sec 80 CCD (1) with in the overall ceiling of Rs. 1.5 lac under Sec 80 CCE.
Exclusive Tax Benefit to all NPS Subscribers u/s 80CCD (1B)
An additional deduction for investment up to Rs. 50,000 in NPS (Tier I account) is available exclusively to NPS subscribers under subsection 80CCD (1B). This is over and above the deduction of Rs. 1.5 lakh available under section 80C of Income Tax Act. 1961.
Tax Benefits under the Corporate Sector:
Corporate Subscriber : Additional Tax Benefit is available to Subscribers under Corporate Sector, u/s 80CCD (2) of Income Tax Act. Employer’s NPS contribution (for the benefit of employee) up to 10% of salary (Basic + DA), is deductible from taxable income, without any monetary limit.
Corporates: Employer’s Contribution towards NPS up to 10% of salary (Basic + DA) can be deducted as ‘Business Expense’ from their Profit & Loss Account.
How to make the Investment to avail the Tax Benefit : If you are an existing Subscriber, you can approach any POP-SP or alternatively you can visit eNPS website (https://enps.nsdl.com) for making additional contribution in your Tier I account.
Please note: Tax benefits are applicable for investments in Tier I account only.
What will be the investment proof to avail the tax benefit under NPS?
The Subscriber can submit the Transaction Statement as an investment proof. Alternatively, Subscriber from “All Citizens of India” can also download the receipt of voluntary contribution made in Tier I account for the required financial year from NPS account log-in. It can be downloaded from the sub menu “Statement of Voluntary Contribution under National Pension System (NPS)” available under main menu “View” in NPS account log-in.
What are other tax benefits under NPS apart from available u/s 80CCD?
Apart from tax benefits available under 80CCD, below are the other tax benefits available under NPS:
- Tax benefits on partial withdrawal : Subscriber can partially withdraw from NPS tier I account before the age of 60 for specified purposes. According to Budget 2017, amount withdrawn up to 25 per cent of Subscriber contribution is exempt from tax.
- Tax benefit on Annuity purchase : Amount invested in purchase of Annuity, is fully exempt from tax. However, annuity income that you receive in the subsequent years will be subject to income tax.
- Tax benefit on lump sum withdrawal : After Subscriber attain the age of 60, up to 40 percent of the total corpus withdrawn in lump sum is exempt from tax.
- For example : If total corpus at the age of 60 is 10 lakhs, then 40% of the total corpus ie 4 lakhs, you can withdraw without paying any tax. So, if you use 40% of NPS corpus for lump sum withdrawal and remaining 60% for annuity purchase at the time of retirement, you do not pay any tax at that time. Only the annuity income that you receive in the subsequent years will be subject to income tax.
What are the tax benefits on investments under Tier II account?
There is no tax benefit on investment towards Tier II NPS Account.
Contact us for more details and invest in NPS at kbkumawat@gmaill.com or 9887154423.
Source :- https://www.npscra.nsdl.co.in/