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Better Early than late to Start Saving taxes with NPS!


Paying huge taxes and looking for ways to save some money? Why wait till the end of the year to find tax-saving investment options?

Avoid the last minute tax-saving stress and plan your investments in advance to get maximum advantage. Start at the beginning of the financial year.

If you are exploring safe and reliable ways of saving some taxes, the National Pension System or NPS may be the one for you.

In a nutshell, NPS is a social security scheme that helps you plan for your retirement early on and also gives you the opportunity to save taxes. Here’s how:

What is NPS?

NPS is a pension scheme offered by the central government for working individuals. The scheme is open to employees from the government, private and unorganised sectors. It is a scheme designed to make provisions from retirement.

When you invest in the NPS, you open a pension account. All throughout your employment period, at regular intervals, you pay instalments towards this pension account. When you retire, you can withdraw a part of this pension fund. The rest of the fund will be paid to you as a monthly pension.

Why should I invest in NPS?

NPS is one of the most reliable ways of securing your post-retirement days. But why should you worry about retirement now? Why not, we say. With the NPS you can enjoy your retirement days without having to worry about a monthly income or asking your family for funds.

If you’re still not convinced, we have two words for you: tax benefits. You can claim tax deduction of up to 10% of your salary.

Tax benefits of NPS

You can claim tax exemption of up to Rs. 2 lakh under the National Pension System.

Tax Benefits under Section 80C

NPS is one of the listed investment options in which you can invest and save tax under Section 80C. The deduction limit for this section is Rs. 1.5 lakhs, and you can invest the entire amount in NPS, if you wish and claim the deduction.

Tax Benefits under Section 80CCD (1B)

This is an additional tax benefit given only to NPS investors. Under this section, you can claim tax deductions for your investments up to Rs 50,000. This is over and above the deduction that you can claim under Section 80C.

So, you can claim tax deduction up to Rs 2 lakh simply by investing in NPS – Rs 1.5 lakh under Section 80C and another Rs 50,000 under Section 80CCD (1B). That means if you fall under the tax bracket of 30 percent, you can save Rs 62,400 in taxes.

Tax Benefits under Section 80CCD (2)

This benefit can be availed on the contributions made by the employer, hence, this one is meant for the salaried individual and not self-employed. Government employees can claim 14 percent of their salary tax deduction under this section. Meanwhile, for private sector employees it is capped at 10 percent of their salary.

Tax benefits on returns of and maturity amount

The tax benefits of NPS don’t just end at the investment amount. As an investor, you don’t have to pay any tax on the returns or the maturity amount also. This kind of tax treatment is called EEE i.e. exempt-exempt-exempt. In India, this tax treatment is available only on a selected few financial products.

One should not just aim for the tax benefits. Therefore, investing in the NPS should be a method to fulfill the retirement needs.

Disclaimer:- ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470.  PFRDA registration numbers:  POP no -05092018. We are distributors of National Pension Scheme. Please note, National Pension Scheme related services are not Exchange traded products and I-Sec is just acting as distributor to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing.