National Pension Sysytem (NPS) - All citizens of India

What is National Pension System?

 

The person (employee/citizen) who joins the NPS will be known as "Subscriber" in the NPS. Under the NPS, each Subscriber will open an account with Central Recordkeeping Agency (CRA) which will be identified through unique Permanent Retirement Account Number (PRAN).

Under NPS, two types of account would be available to subscribers i.e.

Tier I

Tier II;

Tier I account - where subscribers contribute his / her savings (may include employers contribution in case of Corporate sector) for retirement into a non-withdrawable account,

Tier II account - a voluntary savings account from which subscribers are free to withdraw their savings whenever he wishes. The facility of Tier II account was made available from December 01, 2009 to All Citizens of India including Govt. employees and Corporate sector subscribers not mandatorily covered under NPS. An active Tier I account will be a pre requisite for opening of a Tier II.

 

Minimum contribution is Rs. 500 per month or Rs. 6000 in a year .

 

What are the tax benefits of NPS?

Tax benefit to employee:
Individuals who are employed and contributing to NPS would enjoy tax benefits on their own contributions as well as their employer’s contribution as under: -
(a) Employee’s own contribution - Eligible for tax deduction up to 10% of Salary (Basic + DA) under Section 80 CCD(1) within the overall ceiling of Rs. 1.5 lac under Sec 80 CCE.
(b) Employer’s contribution – The employee is eligible for tax deduction up to 10% of Salary (Basic + DA) contributed by employer under Sec 80 CCC(2) over and above the limit of Rs. 1.5 lac provided under Sec 80 CCE.

Tax benefit for self-employed:
Eligible for tax deduction up to 10 % of gross income under Sec 80 CCD (1) with in the overall ceiling of Rs. 1.5 lac under Sec 80 CCE.

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