How NPS investing offers the best of two worlds: Tax Saving and Wealth Creation?

financialexpress.com:

You probably don’t need to worry about your retirement if you were born with a silver spoon. But if you are a self-made person, then your investment portfolio is incomplete without the National Pension System (NPS).

NPS was introduced by the Central Government to help individuals have income in the form of pensions to take care of their retirement needs. The Pension Fund Regulatory and Development Authority (PFRDA) regulates and administers NPS under the PFRDA Act, 2013.

Here’s why NPS is good for you.

NPS offers both tax savings and wealth creation opportunities. 

1) Tax Savings:

NPS offers tax benefits under Section 80C of the Income Tax Act. A subscriber can claim a deduction of up to Rs. 1.5 lakh per annum on contributions made to the NPS Tier-I account. This deduction can help reduce the taxable income and consequently the tax liability.

Additional Deduction under Section 80CCD (1B): In addition to the Section 80C deduction, NPS also provides an exclusive deduction of up to Rs. 50,000 under Section 80CCD (1B). This extra deduction is a significant tax-saving advantage for NPS investors.

Additionally, a deduction of up to 10% of Basic salary under Section 80 CCD (2) in case of deduction through salary by the employer for corporate employees under NPS. This deduction is capped at Rs. 7.5 lacs.

Tax Exempt at all stages: While subscribers can claim tax deductions on NPS contributions as detailed in the above-mentioned points, the withdrawal (up to 60%) is also tax-exempt making NPS an Exempt-Exempt-Exempt (EEE) category product. 

Suitable under the old regime as well as the new regime of taxation for corporate employees. Only NPS investment through salary deduction (80 CCD (2)) is available under the new tax regime.

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