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, up-to 7.5 Lakh. - Corporates
Employer’s Contribution towards NPS up to 10% of salary (Basic + DA) can be deducted as ‘Business Expense’ from their Profit & Loss Account.
How to make the Investment to avail the Tax Benefit:
If you are an existing Subscriber, you can approach any POP-SP or alternatively you can visit eNPS website (https://enps.nsdl.com) for making additional contribution in your Tier I account.
Please note: Tax benefits are applicable for investments in Tier I account only.
I've got quite a bit of experience in financial planning and taxation, especially regarding investment instruments like the National Pension System (NPS) and the associated tax benefits under various sections of the Income Tax Act. Let's break down the concepts mentioned in the article.
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Section 80CCD (1): This section allows individuals who are subscribers of the NPS to claim a tax benefit within the overall ceiling of Rs. 1.5 lakh under Section 80CCE of the Income Tax Act. Essentially, contributions made to NPS fall under this section for tax deduction purposes.
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Section 80CCD (1B): An additional deduction of up to Rs. 50,000 in NPS (Tier I account) is exclusively available to NPS subscribers under this subsection. It's an over-and-above benefit apart from the Rs. 1.5 lakh deduction available under Section 80C.
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Section 80CCD (2): This section provides an additional tax benefit to corporate subscribers of NPS. The employer's NPS contribution, up to 10% of the employee's salary (Basic + DA), is deductible from taxable income up to 7.5 lakh.
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Employer's Contribution: For corporates, the employer's contribution towards NPS, up to 10% of the employee's salary (Basic + DA), can be claimed as a 'Business Expense' from their Profit & Loss Account. This is separate from the individual tax benefits.
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Investment Procedure: For existing subscribers looking to invest further and avail these tax benefits, they can approach a Point of Presence (POP-SP) or use the eNPS website () to make additional contributions specifically into their Tier I account. It's crucial to note that tax benefits apply only to investments made in the Tier I account.
In essence, individuals investing in NPS can leverage these sections of the Income Tax Act to optimize their tax liabilities while securing their retirement savings. The delineation between individual and corporate benefits underscores the different ways NPS contributions are treated for tax purposes.
