Source: Bankbazaar.com
The
New Pension Scheme (NPS) is regulated by the Pension Fund Regulatory and
Development Authority (PFRDA). NPS is a marked-linked product and therefore,
offers returns based on the fund performance. NPS,
introduced in 20014, was initially aimed at government employees but was subsequently
extended to all citizens in 2009.
Tax Benefits
Finance
minister Arun Jaitley, in his budget speech for financial year 2015-16, announced
an additional deduction of Rs.50,000 for new pension scheme. As a result, citizens
who are in the highest tax bracket (30%) and thereby save Rs.16,000. The new extra
deduction announced will take the total deduction allowed in the scheme under section
80C and 80CCD of IT Act, 1961 to Rs. 2 lakh. It is important to note that contribution
to the new pension scheme up to Rs.1.5 lakh is not taxed. The new pension scheme has two tiers, namely,
tier-I and tier II accounts. While a subscriber cannot withdraw from the tier-I
account which is primarily structured for retirement savings, he or she can avail
of tax benefits in tier I accounts.
However,
tier II account can be opened by a subscriber only if he or she has an active tier
I account. A
subscriber can withdraw from the tier-II account according to his or her financial
requirements. Tier-II account is, therefore, akin to a savings account in many ways.
Unlike a ULIP, subscribers in the new pension scheme have the option to choose from
various pension fund managers. Subscribers can also shift from one pension fund
manager to another one in a year. It is important to note that there are no tax
implications when an investor shifts his or her pension fund manager.
Tier I account and
tax benefits
Given
that a tier-I account under the new pension scheme is primarily aimed at providing
post-retirement benefits to the investor and does not allow any withdrawals, it
is eligible for various tax benefits. On the other hand, Tier-II account
does not allow any withdrawals and does not offer any tax benefits, you can use NPS calculator
to get an estimate of your scheme amount
Tier
1 account offers various tax deductions as listed below:
Rs.1,50,000
as per section 80CCD(1)(section 80C) The deduction which may be claimed has to be
minimum of 10% of gross income (in case of a self-employed taxpayer) or 10% of salary
(in case of the taxpayer being an employee) or Rs.1,50,000.
Rs.50,000
as per section 80CCD(1b) (budget 2015 offers additional tax benefit under section
80CCD of the Income Tax Act,1961). Investors can, therefore, avail of (maximum)
a tax benefit of Rs. 2 lakhs.
10%
of basic salary + dearness allowance as per section 80CCD(2). An employer’s contribution
can be shown as deduction under section 36 I (IV) from business income. The minimum
deduction claimed should not be above 10% of the salary while there is no limit
in terms of the maximum amount. The deduction applicable as per section 80CCD(2)
is, therefore, over and above Rs.1,50,000 as per section 80C and 80CCD(1).
New Pension Scheme
and EET system
The
new pension scheme fall into the category of the EET (exempt-exempt-tax) system
in that contributions are eligible for deduction, withdrawals are fully taxable while returns
are exempt from tax.
 is regulated by the Pension Fund Regulatory and Development Authority (PFRDA)....){kind=link}
Post a Comment