National Pension Scheme: Know tax benefits, other key details

The National Pension Scheme (NPS) is a contribution pension scheme that permits an person to plot for retirement even as nevertheless running through gathering a pension corpus. It is obligatory for Central Government personnel who began out paintings after January 1, 2004, and nearly all country governments have followed it for his or her personnel. Individuals withinside the non-public area can voluntarily join the scheme.

Employees make a contribution 10% in their fundamental revenue to NPS, even as employers make a contribution as much as 14% beneathneath NPS. All Indians, each residential and non-residential, among the a long time of 18 and 70 are eligible to open an account with NPS.

Individual financial savings are pooled in a pension fund and invested in varied portfolios of Government Bonds, Bills, Corporate Debentures, and Shares through PFRDA-regulated expert fund managers according with permitted funding pointers of the scheme. These contributions could develop and gather over time, primarily based totally at the returns at the funding.

All you want to know

- NPS is regulated through the Pension Fund Regulatory and Development Authority (PFRDA) and is open to all Indian citizens.

- Designed in 2004 as an opportunity to authorities pensions, it turned into voluntarily prolonged to all Indians in 2009, together with self-hired experts and others withinside the unorganised area.

- NPS money owed may be transferred among jobs and locations/geographies.

- Tax incentives are to be had to subscribers beneathneath the Income Tax Act 1961.

- It presents market-connected returns primarily based totally at the subscriber`s funding choices.

- Subscribers have on line get entry to to their NPS money owed.

- At the time of ordinary go out from the NPS, subscribers can also additionally use the collected pension wealth to buy a existence annuity from a PFRDA-permitted Life Insurance Company, similarly to retreating a part of the collected pension wealth as a lump sum in the event that they so desire.

Types of NPS account

Tier I and Tier II NPS money owed are to be had. Tier I of the NPS is an person pension account, while Tier II is a voluntary financial savings facility to be had as an add-directly to tier I account holders. Tier I money owed have tax advantages however the quantity that may be withdrawn is confined beneathneath sure conditions. Tier II money owed don't have any tax benefits however no withdrawal restrictions. The NPS tier I account is obligatory however the subscriber has the choice of commencing a Tier II account.

Tax advantages

Any person who's an NPS subscriber can declare a tax gain beneathneath Section eighty CCD (1) as much as a most of Rs. 1.five lakh beneathneath Section eighty CCE.

Under subsection 80CCD (1B), NPS subscribers are eligible for an extra deduction for investments as much as Rs. 50,000 in NPS (Tier I money owed). This is similarly to the Rs. 1.five lakh deduction to be had beneathneath Section 80C of the Income Tax Act of 1961.

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