InvestorQ : What are the income tax reliefs available to individuals contributing to National Pension Scheme (NPS)?
divya Sing made post

What are the income tax reliefs available to individuals contributing to National Pension Scheme (NPS)?

Answer
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Nishita Gala answered.
1 year ago


The National Pension Scheme is a voluntary and long-term investment plan for those who want to create their retirement corpus. Under this scheme, one’s savings will be invested in debt and equity market, based on the insured individual’s preference.

The National Pension Scheme, which is voluntary, comes under the purview of the central government as well as the Pension Fund Regulatory and Development Authority (PFRDA).

The scheme allows you to withdraw 60% of the funds at the time of retirement and the remaining 40% is used for the purchase of the annuity. The maturity amount is subject to tax.

The National Pension Scheme is best suited for:

- Those individuals who are risk averse

- Private sector employees

- Any salaried individual who wants to invest in a manner that best utilizes the Section 80C deductions.

Tax benefit to employee: Individuals who are employed and contributing to NPS would enjoy tax benefits on their own contributions as well as their employer’s contribution as under:

(a) Employee’s own contribution - Eligible for tax deduction up to 10% of Salary (Basic + DA) under Section 80 CCD(1) within the overall ceiling of Rs. 1 lakh under Section 80 CCE.

(b) Employer’s contribution – The employee is eligible for tax deduction up to 10% of Salary (Basic + DA) contributed by employer under Section 80 CCC(2) over and above the limit of Rs. 1 lakh provided under Section 80 CCE.

Tax benefit for self-employed individuals: Eligible for tax deduction up to 10 % of gross income under Section 80 CCD (1) with in the overall ceiling of Rs. 1 lakh under Section 80 CCE.