What are the tax benefits of NPS?
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Hey there! NPS (National Pension System) offers some attractive tax benefits. Contributions made towards NPS are eligible for tax deductions under Section 80CCD(1) of the Income Tax Act. You can claim a deduction of up to 10% of your salary (for salaried individuals) or 20% of your gross income (for self-employed individuals) under this section.
Additionally, an exclusive tax benefit of up to Rs. 50,000 is available under Section 80CCD(1B) for contributions made to the NPS. This is over and above the deduction mentioned earlier.
At the time of retirement, you can withdraw up to 60% of the accumulated corpus as a lump sum, which is tax-exempt. The remaining 40% must be used to purchase an annuity, which provides a regular pension income, and the income from the annuity is taxable.
It’s always a good idea to consult with a tax advisor or financial planner to understand the tax implications specific to your situation. 😊💰🏦
Employees contributing to NPS are eligible for following tax benefits on their own contribution: Tax deduction up to 10% of salary (Basic + DA) under section 80 CCD(1) within the overall ceiling of Rs. 1.50 lakh under Sec 80 CCE.