What is NPS and its Benefits?

General
1

I want to know about the National Pension Scheme. Could you please let me know what is NPS scheme and benefits of this scheme?

2

To put it simply, the National Pension Scheme or NPS is a scheme designed to save up for your retirement. It is different from other pension schemes as it is linked to the stock market. NPS is a government-sponsored pension scheme mainly to encourage people to build a corpus systematically by contributing regularly towards NPS.

There are a few benefits associated with the National Pension Scheme.

  • It is regulated by the Pension Fund Regulator under the Ministry of Finance, Government of India.
  • NPS offers flexibility in terms of selecting the investments, fund management, Point of Presence

Most importantly, you get amazing tax benefits.

  • You get tax deduction of up to 10% of basic salary under Section CCD (1) at the upper cap of Rs. 1.5 lakhs given in Section 80 CCE.
  • You can claim tax deduction of up to Rs. 50000 under Section 80 CCD(1b) over and above the limit of Rs. 1.5 lakhs in Section 80CCE.
  • In case your employer makes the contribution, you can claim tax deduction of up to 10% of salary under section 80 CCD(2) over the limit of Rs. 1.5 lakhs of Sec 80CCE. (The limit is 14% if contribution is made by the Central Government).
  • In case you are self-employed, you get tax deduction of up to 20% of gross income under section CCD (1). The overall ceiling limit of Rs. 1.5 lakhs under section 80 CCE applied here as well.
  • You can also claim tax deduction up to ₹50,000 under section 80 CCD(1B) over and above the overall ceiling of ₹1.50 lakh under Sec 80 CCE as a self-employed individual.

If you want to partially withdraw from your NPS account, you get tax exemption of up to 25% of the self contribution amount as per T&Cs under PFRDA.

Overall, this is what is NPS account and its benefits in a nutshell.

Cheers!