National Pension Scheme and Tax Benefits 23/04/2019 – Posted in: Daily News

NPS (National Pension Scheme)

For: Preliminary & Mains

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Any individual, who avails the NPS, can claim a deduction in tax up to 10 percent of his/her gross income. All the tax benefits which are entitled to an individual are available only for investments in Tier I account.

 

Tax Benefits

Under NPS, all Indian citizens and NRIs between age 18 and 60 years can invest and claim tax deductions of up to Rs. 1.5 lakh u/s 80C every year, and an additional Rs. 50,000 u/s 80CCD(1B).

 

Benefits under Section 80CCD (1B)

Section 80CCD relates to the deductions available for an individual under the contributions made to the National Pension Scheme (NPS) or the Atal Pension Yojana (APY).

 

Benefits for corporate sector

An additional tax benefit, apart from the above two, can be availed by the subscribers under the Corporate Sector. Up to 10 per cent of an individual’s salary (Basic + DA) is deductible from the income which comes under the tax slab, without any monetary limit.

Up to 10 per cent of an individual’s salary (Basic + DA) can be deducted as ‘Business Expense’ from their Profit and Loss Account.

 

NPS

National Pension Scheme is a voluntary defined contribution pension system in India. NPS like PPF and EPF is an EEE (Exempt-Exempt-Exempt) instrument in India where entire corpus escapes tax at maturity and entire pension withdrawal amount is tax-free. It is a pension cum investment scheme launched by Government of India to provide old age security to Citizens of India.  The Scheme is regulated by Pension Fund Regulatory and Development Authority (PFRDA).National Pension System Trust (NPST) established by PFRDA is the registered owner of all assets under NPS.

With an aim to stop defined benefit pensions for all its employees who joined after January 1st, 2004, the Government of India launched the National Pension Scheme, initially only for the government employees. It was only in 2009 when the scheme had opened up for all the Indian citizens between the age of 18 to 60.

It was on December 10th, 2018, when National Pension Scheme of India was declared an entirely tax-free instrument, where entire corpus escapes tax at maturity; the 40% annuity also became tax-free. The contribution under Tier-II of NPS is covered under Section 80C for deduction up to Rs. 1.50 lakh for income tax benefits, provided there is a lock-in period of three years.

 

Source: Indian Express