Tax Benefits for Employee under Corporate NPS
Corporate NPS offers platform to save tax for you and your employer both.
Tax Benefit for Employee
You can route your contribution through your employer or contribute in your NPS account directly. Both contributions are eligible for tax deduction as shown below:
Contribution routed through Employer
You can invest of up to 10% of Salary (Basic + DA). This investment is eligible for tax deduction u/s 80CCD (2) of Income Tax Act, 1961.
Upper limit of tax benefit is Rs.7.5 lakh.
Employee’s own contribution
You can invest up to Rs.50,000 more. This investment eligible for tax deduction u/s 80CCD (1B) of Income Tax Act, 1961.
Contribution routed through Employer
You can invest of up to 10% of Salary (Basic + DA). This investment is eligible for tax deduction u/s 80CCD (2) of Income Tax Act, 1961.
Upper limit of tax benefit is Rs.7.5 lakh
Employee’s own contribution
You can invest up to Rs.50,000 more. This investment eligible for tax deduction u/s 80CCD (1B) of Income Tax Act, 1961.
Tax benefit u/s 80CCD (1B) and 80CCD (2) are mutually exclusive & over and above 1.5 lakhs limit u/s 80C. Both benefits can be availed at the same time.
To understand how your salary structure will change after contribution to Corporate NPS through your employer, please click here.
Tax Treatment on Exit from NPS
- Up to 60% of Corpus withdrawn in lump sum at the time of retirement is exempt from tax.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.
Tax Benefit for Employer
Contribution, to the extent of 10% of Salary (Basic + DA) deposited by Employer in NPS account of the Employee is eligible for Business Expense under section 36 (1) (IV) of Income Tax Act, 1961.
