20 May 2018 | 8:21 PM

National Pension System (NPS)

What is NPS?

National Pension System (NPS) is a voluntary, defined contribution retirement savings scheme designed to enable the subscribers to make optimum decisions regarding their future through systematic savings during their working life

Under the NPS, individual savings are pooled in to a pension fund which are invested by PFRDA regulated professional fund managers in to the diversified portfolios comprising of government bonds, bills, corporate debentures and shares. These contributions grow and accumulate over the years, depending on the returns earned on the investment made.
National Pension System (NPS)

What are the advantages in joining NPS?

A safe retirement fund

Introduced by the Government of India and regulated by the Pension Fund Regulatory & Development Authority (PFRDA).
 

Flexible

NPS offers a range of investment options and choice of Pension Fund Manager (PFMs) for planning the growth of your investments in a reasonable manner and see your money grow. Individuals can switch over from one investment option to another or from one fund manager to another subject to conditions.
 

Simple

Opening an account with NPS provides a Permanent Retirement Account Number (PRAN), which is a unique number and it remains with the subscriber throughout his lifetime.
 

Portable

NPS provides seamless portability across jobs and across locations, unlike all current pension plans, including that of the EPFO. It would provide hassle-free arrangement for the individual subscribers.

Who can Join NPS?

  • Citizen of India; Resident or Non-Resident
  • Salaried or Self Employed
  • Age between 18-60 years, as on date of joining

Tax benefits of NPS

Tax benefits for Individuals (All Citizen Model)

Self employed individual is eligible for tax deduction of up to 10% of Gross Income under section 80CCD (1) of Income Tax Act, 1961 within Rs.1.5 Lacs limit under section 80CCE
Additional investment of Rs.50,000 will be eligible for tax deduction under section 80CCD (1B) of Income Tax Act, 1961. This is over and above of Rs. 1.5 lacs limit under section 80CCE
 

Tax benefits for Salaried Individuals (Corporate Model)

Contribution made by Employee

Salaried individual is eligible for tax deduction of up to 10% of Salary (Basic + Dearness Allowance) under section 80CCD (1) of Income Tax Act, 1961 within Rs.1.5 Lacs limit under section 80CCE
Additional investment of Rs.50,000 will be eligible for tax deduction under section 80CCD (1B) of Income Tax Act, 1961. This is over and above of Rs. 1.5 lacs limit under section 80CCE

Contribution made by Employer

Employer contribution to the NPS scheme on behalf of employee, the employee would also be allowed deduction u/s 80CCD (2) to the extent of 10% of Salary (Basic + Dearness Allowance).
There is no upper cap in terms of absolute value in case of section 80CCD (2)

Tax benefits for Corporate

Contribution made by the Corporate towards NPS account of Employee is eligible for tax deductions under section 36 (iv) of Income Tax Act, 1961

 

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