Tax Benefit On National Pension Scheme

Regulated by the PFRDA, the National Pension System is a scheme that allows you to invest small amounts throughout your working life and reap its benefits when you retire. NPS is a unique market-linked scheme that also provides excellent tax savings.

You can withdraw 60% of your corpus amount upon retirement, while the remaining 40% must be invested in an annuity that will give you a regular monthly pension.

You can use NPS to invest across multiple asset classes, including equity, corporate debt, government bonds and alternative investment funds.

Investors can choose the Active choice if they wish to control the portfolio allocation between the four asset classes, or they can choose Auto choice, which automatically controls the portfolio allocation based on the investor’s age.

Invest in the National Pension Scheme [NPS] launched by the Government of India to benefit from earning a lifelong monthly pension during your retirement. With tax saving benefits, start to build your retirement corpus through ICICIdirect with NPS today.

There are two types of NPS accounts.

The NPS Tier I account is the main account, which helps you build a retirement corpus. Tier II is a voluntary savings account.

The Tier I account offers many tax benefits, while the Tier II account offers no tax benefits.

Your investments in Tier I are locked-in till age 60. You can make partial withdrawals for specific purposes.

You can open a Tier II account only if you have a Tier I account. You can withdraw the funds in the Tier II account at any time.

As per Union Budget 2019, NPS now qualifies for EEE tax exemption status.The entire 60% withdrawable amount on maturity is exempt from tax.

As an NPS subscriber, you can claim tax exemptions on investments up to Rs. 150,000 under Section 80C of the IT Act.

As a Tier I account holder, you get additional tax benefits of up to Rs. 50,000 under Section 80CCD(1). This benefit is extended over and above the deduction permitted under Section 80C, increasing your total income deduction to Rs. 200,000 per annum.If you belong to the highest tax slab of 30 per cent, you can save up to Rs. 62,400 by investing in NPS.