National Pension Scheme– Do you want that there should be no shortage of money in your pocket even after retirement? Do you think that you should remain self-reliant even when you are old? In such a situation, National Pension System (NPS) is a reliable government scheme to secure your future. This is a scheme which is supported by the Government of India and is operated by the Pension Fund Regulatory and Development Authority (PFRDA).
In this scheme, you invest a part of your earnings regularly, and when you retire, you have a good pension fund. NPS gives you complete freedom to decide where and how your money is invested. You can choose the pension fund manager of your choice, and can also decide how much of your money should be invested in equity (stock market), corporate bonds or government securities.
What is NPS?
National Pension System (NPS) is a contribution-based retirement saving scheme operated by the Government of India. This scheme encourages people to make regular savings during their working life so that they can get financial security after retirement. This scheme is operated by the Pension Fund Regulatory and Development Authority (PFRDA). It is a flexible scheme in which the customer can choose the investment option and pension fund manager himself. It is a low-cost, portable and tax-advantaged scheme.
Benefits available in NPS
Currently, employees contributing to NPS get tax exemption up to 10% of salary (basic and DA) under section 80CCD (1) within the total limit of Rs 1.50 lakh under section 80CCE. Apart from this, an additional tax exemption of up to Rs 50,000 is available under section 80CCD (1B). Under section 80CCD (2), tax exemption is available up to 10% of the salary (basic and DA) contributed by the employer. On the other hand, if such contribution is made by the Central Government, then tax exemption of up to 14% is available even after the total limit of Rs 1.50 lakh under 80CCE.
Tax benefits on partial withdrawal from NPS
Up to 25 per cent of one’s own contribution is tax deductible. Purchase of annuity after retirement is tax deductible, while income from annuity is taxable. Lump sum withdrawal of 60 per cent of the accumulated pension wealth on retirement at the age of 60 is tax-free under Section 10(12A) of the Income Tax Act.