Investing in NPS

• Contribution made to notified Pension Scheme of the Central Government are exempt under section 80 CCD (1)

• Deduction is available to salaried as well as non salaried individuals

 In case of salaried employees, an amount equivalent to the amount contributed or 10% of BASIC SALARY + DA of the employee, whichever is less. (Section 36 (1) (iv a) of the Income Tax Act 1961). shall be exempt:

 In case of non salaried individuals 10% of the Gross Total Income in the Financial Year or the amount contributed, whichever is less

• Contribution by individual is eligible for a deduction from Income under Section 80CCD (1) of the Income Tax Act 1961 upto a maximum of Rs. 1.5 Lakhs. However, investments under Section 80C Section 80CCC and 80CCD(1) should not exceed Rs.1.5 lakhs per assessment year to claim for the deduction.

• An additional exclusive tax benefit of Rs.50,000/- under section 80CCD (1B) per assessment year (applicable from FY 2015-16/AY 2016-17) for NPS investments

• Employer’s contribution to NPS on behalf of the employee is treated as perquisite in the hands of the employees, but is deductible u/s 80CCD (2) of the Income tax Act, 1961 to the extent of 10% of basic salary. This deduction is over and above the limit of Rs.1.5 lac u/s 80 CCD (1). This will lessen the tax burden of the employee to the extent of amount deductible u/s80CCD (2) of the Income tax Act, 1961

• There is a maximum limit for deduction for contribution made by the individual himself under section 80CCD(1) as mentioned above. But for contribution made by the employer to NPS scheme for benefit of employee, there is no maximum limit for deduction allowed under section 80CCD(2).

• The amount received by the individual as Pension after retirement or on surrender of the Policy which was claimed as deduction under section 80CCD would be regarded as income in the hands of the recipient (individual himself or his nominee) and would be taxed in the year or receipt