NPS

What is National Pension Scheme (NPS)

NPS (National Pension System) is a defined contribution based pension system launched by Government of India with the following objectives:

• To provide old age income
• Reasonable market based returns over long run
• Extending old age security coverage to all citizens

It is based on a unique Permanent Retirement Account Number (PRAN) which is allotted to each subscriber upon joining NPS. The Government of India in exercise of their executive powers adopted 'National Pension System' (NPS) based on defined contributions in respect of all new entrants to central government services, except the armed forces, with effect from 1st January 2004. Most of the state governments have since notified a similar pension system for their new entrants. NPS accumulates savings into subscribers PRA while he/she is working and use the accumulations at retirement to procure a pension for the rest of his life.

Benefits of NPS

• It is voluntary - A Subscriber can contribute at any point of time in a Financial Year and also change the amount he wants to set aside and save every year.
• It is simple - Subscriber is required to open an account with any one of the POPs (Point of Presence) or through eNPS (https://enps.nsdl.com/eNPS/).
• It is flexible - Subscribers can choose their own investment options and pension fund and see their money grow.
• It is portable - Subscribers can operate their account from anywhere, even if they change the city and/or employment.
• It is regulated - NPS is regulated by PFRDA, with transparent investment norms and regular monitoring and performance review of fund managers by NPS Trust.

Tax Benefits Under NPS

Tax Benefit available to Individual
Any individual who is Subscriber of NPS can claim tax benefit under Sec 80 CCD (1) with in the overall ceiling of Rs. 1.5 lac under Sec 80 CCE.

Exclusive Tax Benefit to all NPS Subscribers u/s 80CCD (1B)
An additional deduction for investment up to Rs. 50,000 in NPS (Tier I account) is available exclusively to NPS subscribers under subsection 80CCD (1B). This is over and above the deduction of Rs. 1.5 lakh available under section 80C of Income Tax Act. 1961.

Tax Benefits Under the Corporate Sector:

Corporate Subscriber:
Additional Tax Benefit is available to Subscribers under Corporate Sector, u/s 80CCD (2) of Income Tax Act. Employer's NPS contribution (for the benefit of employee) up to 10% of salary (Basic + DA), is deductible from taxable income, without any monetary limit.

Corporates
Employer’s Contribution towards NPS up to 10% of salary (Basic + DA) can be deducted as ‘Business Expense’ from their Profit & Loss Account.