Retirement conjures up many pleasant moments, including travelling, hanging out with friends, and many others. Nevertheless, none of this is feasible unless you have a sizable cash reserve to cover all of your planned expenses. NPS or National Pension System since it became accessible to the general public in 2009, it has been a well-liked investing choice for retirement savings. The tax advantages it provides are a significant factor in addition to its low cost.
The Central Government and the Pension Fund Regulatory and Development Authority (PFRDA) are responsible for overseeing the National Pension Plan (NPS) India, a voluntary long-term investment plan for retirement.
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Here are the tax benefit offered by NPS:
Only investments made in Tier 1 accounts are eligible for a deduction against your NPS contribution, so keep this in mind when making your investments.
1. Tax Benefits under Section 80C
NPS is one of the investment options that are specified as allowing for tax savings under Section 80C. The maximum deduction allowed under this provision is Rs. 1.5 lakhs, and you can invest the entire sum in NPS and still qualify for the deduction.
2. Tax Benefits under Section 80CCD (1B)
You may claim up to Rs 50,000 in taxes from your investments under this section. This is in addition to the reduction you are allowed to make under Section 80C. You can claim a tax deduction of up to Rs 2 lakh (Rs 1.5 lakh under Section 80C and an additional Rs 50,000 under Section 80CCD) (1B). This implies that you can save Rs 62,400 in taxes in the 30% tax bracket.
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3. Tax Benefits under Section 80CCD (2)
This benefit is available based on employer payments, hence it is intended for those who are employed and not self-employed. Under this clause, employees of government agencies are eligible to deduct 14% of their salary from taxes. For those working in the private sector, it is limited to 10% of their pay.
4. Tax benefits on returns of and maturity amount
The tax advantages of NPS extend beyond the investment sum alone. As an investor, you are exempt from taxes on both the returns and the maturity sum. It is known as EEE, or exempt-exempt-exempt, tax treatment. This tax treatment is only provided in India on a small number of particular financial products.
