Tax Saving Investment Plan: National Pension Scheme (NPS)
National Pension Scheme (NPS) is a government-sponsored pension scheme. It was launched in January 2004 for government employees. However, in 2009, it was opened to all sections. The scheme allows subscribers to contribute regularly in a pension account during their working life. On retirement, subscribers can withdraw a part of the corpus in a lumpsum and use the remaining corpus to buy an annuity to secure a regular income after retirement.
Who can join NPS?
Any Indian citizen between 18 and 60 years can join NPS. The only condition is that the person must comply with know your customer (KYC) norms.
And yes, an NRI can also join NPS. However, the account will be closed if there is a change in the citizenship status of the NRI.
What is minimum contribution in NPS?
You have to contribute a minimum of Rs 6,000 every year in your Tier-I account in a financial year.
What are the tax benefits available for NPS?
An employee’s own contribution is eligible for a tax deduction –up to 10 per cent of the salary (basic plus DA) – under Section 80CCD(1) of the Income Tax Act within the overall ceiling of Rs 1.5 lakh allowed under Section 80C and Section 80CCE.
The employer’s contribution to NPS is exempted under Section 80CCD (2).
Moreover, individuals can claim an additional deduction of up to Rs 50,000 under Section 80CCD (1B), which is in addition to Rs 1.5 lakh permitted under Section 80C.
A self-employed person can also contribute 10 per cent of his gross income under Section 80CCD (1) in NPS.