NPS for Retirement Planning

  • It is voluntary - NPS is open to every Indian citizen. Subscriber can choose the amount you want to set aside and save every year.
  • It is flexible - Subscriber can choose your own investment option and Pension Fund Manager and see his money grow.
  • It is portable - Subscriber can operate his account from anywhere in the country, even if he changes city, job or Pension Fund Manager.
  • It is regulated - NPS is regulated by PFRDA, with transparent investment norms and regular monitoring and performance review of fund managers by NPS Trust.
  • Reasonable market based returns - over the long term
  • Tax Benefits - Contribution towards NPS exempted under Sec 80C
  • Low cost investment - Cost effective mode of planning for one's retirement.

Tax Implication of NPS

  • Employer contributing to the NPS on behalf of an employee will get deduction from his income (i.e. employer's income) an amount equivalent to the amount contributed or 10% of BASIC SALARY + DA of the employee, whichever is less. (Section 36 (1) (iv a) of the Income Tax Act 1961).
  • Employer's contribution to NPS on behalf of the employee is treated as perquisite in the hands of the employees, but is deductible u/s 80CCD (2) of the Income tax Act, 1961 to the extent of 10% of basic salary. This deduction is over and above the limit of Rs.1.5 lac u/s 80 CCD (1). This will lessen the tax burden of the employee to the extent of amount deductible u/s80CCD (2) of the Income tax Act, 1961.
  • PlanningContribution by individual employee is eligible for a deduction from Income under Section 80CCD (1) of the Income Tax Act 1961 upto Rs 1.5 Lakhs. However, investments under Section 80C Section 80CCC and 80CCD(1) should not exceed Rs.1.5 lakhs per assessment year to claim for the deduction.
  • An additional exclusive tax benefit of Rs.50,000/- under section 80CCD (1B) per assessment year (applicable from FY 2015-16/AY 2016-17) for NPS investments.