What is the limit of income tax saving in the NPS service in India?

The National Pension Scheme or NPS is a pension scheme available to government and private employees. It is considered one of the most popular options to create a regular income and corpus for retirement. The money invested in NPS is invested in several investments and securities including the equity market. If you are looking to invest in the equity market, National Pension Scheme is one of the cheapest options to do just that. It must be noted that there is no guaranteed amount you receive as returns with NPS. However, over a period of time, returns on NPS are among the highest in the market.

NPS Tax Benefits after Union Budget 2021-22

Investment to the National Pension Scheme now qualifies for Exempt-Exempt-Exempt (EEE) mode of taxation. This means, your NPS contributions, the consequent income generated, and the maturity amount, are all exempted from tax. The latest guidelines specify that up 60% of the maturity is withdrawable and the rest 40% will go to the purchase of an annuity that generates a regular monthly income for you. 

 

NATURE

SECTION

MAX. DEDUCTION

NOTE

Deduction for employer contribution

80CCD(2)

10% of salary (irrespective of amount)

Outside of 80C and 80CCD(1B) limits

Deduction for employee’s contribution

80CCD(1)

10% of salary (up to Rs. 1,50,000)

Within Section 80C

Deduction for Self-contribution to NPS

80CCD(1B)

Rs. 50,000

In addition to 80C and 80CCD(2)

 

Section 80CCD & Section 80CCD (1B)

Section 80CCD of the Income Tax Act deals with tax benefits for government employees and private citizens that contribute to NPS. Until 2015, individuals could claim an income tax deduction of up to Rs. 1 Lakh under the same section. However, the Budget 2015 introduced further relaxations, wherein NPS contribution could be up to Rs. 1.50 Lakh. Additionally, the new subsection Section 80CCD (1B), offered further deductions up to Rs. 50,000/- on contributions towards NPS by individual taxpayers.  

Income Tax Calculation Example for NPS Employee

To give an example, you as an individual make an Rs. 1.50 Lakh investment in say PPF under Section 80C. After this investment, you decide to contribute an annual amount of Rs. 70,000/- towards NPS. Then as per Section 80C & Section 80CCD (1B), you can claim a tax deduction up to Rs. 2 Lakh (Rs. 1.50 Lakh and Rs. 50,000/- under each section respectively).

Rs. 20,000/- of Rs. 70,000/- towards NPS will be taxable. 

From 1st April 2019, the central government had increased the NPS contribution for its employees to 14%. 

If your employer and you are also contributing to the National Pension Scheme, you can use a TAX Calculator to claim all three deductions and maximize your tax benefits. 

Looking to save on Tax and create an income after retirement?

Investment in National Pension Scheme today!

Comments

Post a Comment

Popular posts from this blog

What is the procedure for VAT registration in UAE?

Image
Registration for taxation is mandatory in the UAE for businesses trading goods and providing services. Value Added Tax (VAT) registration simply refers to the tax registration for such businesses.    Contrary to popular belief, not all businesses require VAT registration. Only those exceeding the annual aggregate turnover threshold of AED 375,000 must register. In addition, businesses that cross the total value of supplies in the next 30 days, need to indulge in VAT registration. The rising popularity of VAT is owed to an increasing number of businesses that want to represent themselves as government-acknowledged entities. Once they are VAT registered, they are authorized to collect it from their customers, and later get it remitted to the government. Other reasons why businesses are inclined towards VAT registration in UAE : 1. Collecting VAT for taxable supply of products and services 2. Paying VAT to the government 3. Filing VAT returns periodically 4. Claim Input Tax C
Read more

7 COMMON BENEFITS OF DIGITAL SIGNATURE CERTIFICATE

  When everything is becoming digital these days, why not the signature, right? The digital signature is a great way to secure one’s signature and saving it from getting misused. It is issued by the certifying authorities and it is done to validate a person’s identity. Digital Signature Certificate is a certificate that protects the signature holder’s identity when doing any sort of online transactions.  Especially, clients of big organisations are inclining towards digital signature to make the online operations absolutely genuine. Here are the benefits you should know about the  digital signature certificate . With every business online, a digital signature is the best way to show that the persons involved in the business are genuine and that no one can copy that signature in any way. To get this done, all one requires is to fill the  digital signature certificate   form . You can get it done with the help of a reputed firm that provides such services. Imagine how much digital signat
Read more

Documents Required for GST (Goods and Services Tax) Registration by Alankit

Image
  As notified by the Central Board of Indirect Taxes and Customs, it is not mandatory for certain suppliers of goods to register for GST given their annual turnover is less than INR 40 Lakh. However, as an MSME owner, one should know how to register for GST as you may be in the service sector and the laws may change at any time. To register successfully, one needs to furnish the necessary documents like Aadhaar Card, PAN Card, Address proof. Through this blog, w e  have listed a set of GST registration documents that individuals must provide based on their business type: Who Should Register for GST? As per the Goods and Services Tax Act 2017, businesses with a turnover of INR 40 Lakh and above in a financial year should mandatorily register for GST. In the GST regime, the turnover threshold for North-eastern and hill states to register for GST is INR 10 Lakh. Additionally, individuals listed below need to complete GST registration and obtain a unique 15-digit GSTIN: Non-resident taxabl
Read more