National Pension Scheme is a
government sponsored Pension Scheme, which was launched on January 2004 for Government
employees and later made open for all the section of individuals in May 2009.
National Pension scheme is under the purview of PFRDA (Pension Fund Regulatory
and Development of India). NDSL is the central record keeping agency (CRA) for
NPS. It is a perfect solution for retirement planning.
National Pension Scheme has got
two types of accounts
Tier 1 and Tier 2
Individuals can opt for only Tier
1 or Both Tier 1 and 2. PRAN (Permanent Retirement Account Number) is allotted for
all subscribers of NPS .Tier 1 account is the mandatory account, contributions
cannot be withdrawn until individual attains age of 60. Partial withdrawal is
permitted only on extreme personal needs. Minimum contribution of Rs 500 and at
least Rs 1000/Financial Year is compulsory. Tier 2 account is Voluntary Savings
contribution account. Invested portion can be withdrawn at any time. Tier 2 Minimum
contribution is Rs 250.
NPS Contribution are invested in
Equity, Government Securities and Corporate debts. So Individuals investing in
NPS get wide range of diversification, Risk mitigated returns when compared
with other retirement solutions. Contributions to NPS are managed by the
Pension Funds. Subscribers can select their own fund managers.
NPS offers two choices of
Investment:
1. Active Choice: This option
allows the investor to decide how the money should be invested in different
assets. (Equity (E), Government Securities (G), and Corporate debts (C))
2. Auto choice: This is the default option which invests money automatically in line with the
age of the subscriber across varies sectors.
Tax Benefit available to
Individuals:
Individual Subscribers of NPS can
claim tax deduction up to 10% of gross income under Sec 80 CCD (1) with in the
overall ceiling of Rs. 1.5 lac under Sec 80 CCE.
Corporate Subscriber:
Additional Tax Benefit is
available to Subscribers under Corporate Sector in 80CCD (2) of Income Tax Act.
Employer's NPS contribution (for the benefit of employee) up to 10% of salary
(Basic + DA), is deductible from taxable income, without any monetary limit.
Exclusive Tax Benefit to all NPS
Subscribers u/s 80CCD (1B)
Additional deduction for
investment up to Rs 50,000 in NPS (Tier1 account) can be claimed under
subsection of 80CCD (1B). This is over and above the deduction of Rs 1.5 lakh under
section 80C of Income Tax Act.
Mentotax recommends all the
individuals to open NPS Account for accumulating the retirement corpus. Because
of advantages like well regulated, Flexible for investments, Diversified
portfolio, Tax benefits and better returns.
Mentotax advises EPF (Employee
Provident Fund) Subscribers to open NPS Account and contribute minimum Rs
50,000 in Tier 1 and Contribute Voluntary of Rs 50,000 in Tier 1 to claim tax benefit under sec 80 CCD(1B) of Income tax act. Individuals in 30% Tax Bracket can
save tax up to Rs 15600 , Assesse in 20% Tax Slab can save Rs 10400 and person
in 5% Tax bracket can save Rs 2600 by contributing to Tier 1 of NPS.
Person with Taxable Income up to
Rs 5.00 Lakhs is exempted from paying tax from Financial Year 2020. Better
utilize the NPS to reduce your taxable income and save tax up to Rs 13000/-
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