Income Tax Benefits from National Pension Schemeadmin
Income Tax Benefits from National Pension Scheme
The government announced income tax benefits for investing in National Pension Scheme. Both salaried, as well as self-employed individuals, get these benefits on investing in NPS. NPS is also partially tax exempt on maturity. NPS is a retirement savings scheme, which enables an individual to accumulate savings during his working life.
There are two types of NPS accounts – Tier I and Tier II.
The Tier-I account is non-withdrawable till the individual achieves the age of 60. Incomplete withdrawal before that is permitted in particular cases.
Then again, the Tier-II NPS account is much the same as a saving account and users are allowed to pull back the cash at whatever point they require.
- For salaried people, an investment up to 10 percent of compensation is deductible from taxable income under Section 80CCD(1) of the Income Tax Act in a Financial Year.
Another advantage for salaried people is that an extra investment up to Rs. 50,000 is likewise deductible from taxable income under section 80CCD(1B).
- For self-employed people, investment up to 20 percent of gross yearly salary is deductible from taxable income. It is subject to the furthest reaches of Rs. 1.5 lakh. Another extra advantage is that an investment up to Rs. 50,000 is deductible from taxable income under Section 80CCD(1B) of the Income Tax Act.
- Under the NPS corporate model, an employee can deposit the contribution directly or route the contribution through the employer he or she is working with. For investment routed through an employer, the employer’s contribution to NPS up to 10 percent of basic salary (plus DA) is allowed deduction under Section 80CCD (2).
There is no cap for this deduction but the total deduction claimed for contribution by the employer should not exceed 10 percent of the salary.
- NPS permits fractional withdrawals for particular purposes previously the user achieves the age of 60. 25 percent of the commitment made by a user has been exempted from income tax, as indicated by Budget 2017.
- According to the present tax laws, up to 40 percent of the corpus pulled back in a lump sum amount is absolved from tax when the user achieves the age of 60.
By and large, an NPS user can pull back up to 60 percent of the development corpus at 60 years old. The rest of the sum must be changed over into the annuity. An annuity is a monetary item that gives you periodic income or pension.
- The balance amount invested into an annuity is likewise completely absolved from tax. Notwithstanding, income got as the annuity is taxable.