zyadapaisa.com

Earn more by increasing your knowledge

Tax

Save additional tax of Rs.50,000/- by Investing in NPS (This amount is over and above Rs. 1,50,000/- under section 80C)

Author

What is National Pension Scheme (NPS)

Funds are required at every stage of life, especially after retirement, and since Government has abolished the Pension system for their new employees, the need for an alternative where everyone can get some amount after retirement arises. NPS has come out as a new option for the need.

National Pension Scheme is a Scheme started for individuals who are not covered under the pension system. Earlier it was for government employees only but now all citizens of India can enroll in this Pension Scheme. The national pension scheme is administered by the Pension Fund Regulatory and Development Authority of India which is under the jurisdiction of the Ministry of Finance of the Government of India. As it is a government organization, It is a safe avenue for investment

Tax Benefit

We are aware that Investment up to Rs.1,50,000 is eligible for deduction under section 80C, so generally, all invest in these eligible instruments. Along with that, we have the option to avail an additional deduction of Rs.50,000/- under section 80CCD(1B) by investing in NPS and it would be over and above the tax benefit under section 80C and hence the overall benefit will be of Rs. 2,00,000/-

NPS is an EEE (Exempt-Exempt-Exempt) instrument where you can avail of tax benefits in the following three areas:

  1. Investment is eligible for the tax benefit
  2. The amount earned out of funds.
  3. A major amount of Pension Withdrawal will also be tax-free and would not attract any tax.

Structure of NPS

In this Scheme, The investors will have the option to choose out of four schemes

  1. Scheme E (Equity) – Amount would be Invested in stocks up to 75%  and hence returns would depend on the growth of equity.
  2. Scheme C (Corporate Debt) – Where the amount would be invested in high-quality corporate debt.
  3. Scheme G (Government Bonds) – The amount would be invested in Government bonds, hence returns would be moderate but it is risk-free.
  4. Scheme A (Alternative Investment) – Investors would have the option to choose out of alternative investments.

So, Investors as per their choice can select the best suitable option for them.