A deduction of Rs 1.5 lakh is allowed under section 80CCD(1) for investment in Tier I account of National Pension System.
National Pension System (NPS) is an essential savings scheme for Central Government Employees. All central government employees will have to open NPS accounts. NPS is regulated under the PFRDA Act, 2013 and rules framed by the Department of Financial Services and PFRDA.
At the same time, a big instruction has been given to the employees and UP pensioners to get their mobile and Aadhar card verified. Otherwise, they will stop getting pension. They have only 2 days left for this. On the other hand, due to negligence, he can be deprived of the pension scheme. These instructions have been issued by the Social Welfare Officer for Aadhaar authentication.
NPS Account Opening Rules
- The NPS account of Central Government employees is opened immediately after joining the service. The employees will have to submit an application to the Drawing and Disbursing Officer (DDO) and Pay and Accounts Officer (PAO).
- The Central Government has changed some fundamental rules in the National Pension System (NPS) in the Union Budget to make it more popular among various sections.
This investment option and tax-saving instrument can help in further improving the social security cover for the customers. - Till now central government employees could claim deduction of up to 14 per cent of salary, while other employers were eligible for 10 per cent under contribution.
- This budget has brought equality between the employees of the Central and State Governments. However, private sector employees will have to be satisfied with the 10 per cent cut.
- In last month’s Union Budget, the Center also allowed state government employees to avail tax benefits of 14 per cent at par with central government employees from the earlier 10 per cent on NPS contributions made by their employers from the next financial year (2022-23). was allowed to claim.
- Experts are of the view that unless the private sector is roped in for increased deduction, NPS membership may not get any boost.
Tax benefits under NPS Tier 1: For both private and government employees:-
- A deduction of Rs 1.5 lakh is allowed under section 80CCD(1) for investment in Tier I account of National Pension System.
- However, the aggregate amount of deduction under section 80C, 80CCC and section 80CCD(1) (for NPS) cannot exceed Rs 1.5 lakh in a financial year.
- NPS allows a special deduction of Rs 50,000 under section 80CCD (1B) by way of contribution to Tier 1.
- It is to be noted that if a subscriber opts for the new income tax regime that came into force last year, then a special deduction of Rs 50,000 under section 80CCD (1B) or Rs 1.5 lakh under section 80CCD(1) will not be allowed. These benefits can be availed only in the old taxation regime.
- However, under the new tax regime, income tax deduction can be availed on the employer’s contribution to the employee’s NPS account. This benefit is also available if customers stick to the old income tax regime.
NPS Tier II Account Tax Benefits: Available to Central Government Employees only
- Under the NPS structure, Tier I account (main retirement account) is mandatory and Tier II account is voluntary savings account.
- Tier II is like a savings account to grab your surplus money, which you can withdraw anytime and is optional.
- Under Section 80C(2)(xxv), Section 80C tax incentive is available to Central Government employees if they contribute to Tier-II of NPS, but they must have a lock-in period of three years.
NPS Mobile App
On joining NPS, a subscriber gets a Permanent Retirement Account Number (PRAN) in which all his contributions are credited. It acts as a unique identification number for each NPS account.
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