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Updated on Apr 27, 2023
Through this post, you will learn all about NPS Tax Exemption and Benefits. You will learn the various tax benefits related to NPS under which section of the income tax. So, stay tuned and read on!
NPS is a scheme that is regulated by Pension Fund Regulatory and Development Authority or PFRDA. Initially, it was open for the benefit of only government employees, but later in the year 2009, it was open to all the citizens of India.
The following table will give you a clear idea of NPS tax exemption:
|NPS Contribution||NPS Section in Income Tax||Type of Deduction||Maximum Exemption Limit|
|Self-Contribution||Section 80CCD (1B)||Voluntary contribution by the employer||Rs. 50,000|
|Employee’s Contribution||Section 80CCD (1)||Mandatory 10% deduction of the salary||Rs. 1.5 lakh|
|Employer’s Contribution||Section 80CCD (2)||Voluntary contribution by the employee||10% of the basic salary|
According to the budget proposed in 2020, the following changes were made in the new NPS tax regime:
In a nutshell, investing in an NPS account is one of the best things a person can do for financial security after retirement. NPS enjoys an EEE or Exempt-Exempt-Exempt status in India. It is a good long-term and low-cost investment plan that fits the needs of both salaries and non-salaried individuals in different sectors. One NPS plan can help you get amazing tax deductions under sections 80CCD (1), 80CCD (2), and 80CCD (1B).
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There is no maximum contribution limit for investment in an NPS account. But for fetching tax benefits on these contributions, you can invest up to Rs. 1,50,000 to get tax deductions under section 80CCD (1B).
A person can invest in NPS even after retirement or may choose to exit from the policy. The policyholder can choose superannuation for up to 75 years.
The maximum deduction limit under section 80CCD (1) is up to 10% of the basic salary.
Both salaried and non-salaried individuals can get tax deductions under section 80CCD (1) from an NPS policy.
For an investment of up to Rs. 1,50,000 or move, a person can claim for an additional tax benefit of Rs. 50,000 under section 80CCE. So, in short, a total tax benefit of up to Rs. 2,00,000 can be claimed for NPS in a year.
EEE stands for exempt-exempt-exempt. It is an attractive tax status that can be fetched with an NPS plan. NPS has an EEE status in India because it allows you to enjoy tax exemptions for the investment amount, the growth of the corpus, and the maturity amount.
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