Save your Income Tax with National Pension System (NPS)

Tax Benefits and Treatment

Tax benefits under Tier I and Tier II Account are as per below table

NPS Account Tax Benefit Tax Treatment
Tier I Salaried Individual
  • Investment up to 10% of Salary (Basic + Dearness Allowance) is deductible from taxable income u/s 80CCD (1) of Income Tax Act, 1961 subject to 1.5 lakhs limit of section 80C
  • Additionally, investment up to Rs.50,000 is deductible from taxable income u/s 80CCD (1B) of Income Tax Act, 1961

Self Employed Professionals
  • Investment up to 20% of Gross Annual Income is deductible from taxable income u/s 80CCD (1) of Income Tax Act, 1961 subject to 1.5 lakhs limit of section 80C
  • Additionally, investment up to Rs.50,000 is deductible from taxable income u/s 80CCD (1B) of Income Tax Act, 1961
  • Up to 40% of Corpus withdrawn in lump sum is exempt from tax
  • Balance amount invested in Annuity is also fully exempt from tax
  • Pension received out of investment in Annuity is treated as income and will be taxed appropriately
Tier II There is no tax benefit on investment towards Tier II NPS Account Indexation benefit can be claimed