How to save Tax using NPS Scheme (Tax Benefits)
National Saving plan (NPS) is a valuable instrument for saving in old days. To add to it, NPS is also an important tool for tax saving. Even in the last budget session, the Ministry of Finance added an extra tax benefit of Rs 50,000. Coming under the Section 80CCD (1B), the scheme offers many benefits to the tax payers.
As of now, it is the most sought -after scheme by the income-tax paying salaried people. With its attractive tax saving features, NPS has become a very powerful saving scheme for the old age of people.
How NPS helps to Save Tax?
Let’s know about the tax benefits of NPS scheme that can help you to save good amount of Tax in this 2016-2017 financial year:
1) High deduction limit– Under this, the limit for investment is Rs 1,50,000 for a financial year and this sum comes completely under tax deduction under Section 80C. This is available over all ceiling of Rs 1, 50,000 for the purpose of tax exemption under Section 80 CC.
2) Additional Exemption of Rs 50,000 – As the decision from union government, it has also provided an additional exemption limit of Rs 50,000. This would come under the Section 80CCD.
3) Further eligibility under Section 80CCD – In the norms for eligibility, 10% of basic salary and dearness allowance are fixed for deduction under Section 80CCD (2). This is applicable above the limit of Rs 1, 50,000 given under the Section 80 C of Income-tax.
4) Tax benefit for government and private employees – With the revised provision under national savings plan (NPS), now the benefits under NPS are also available to government as well as corporation and corporate employees.
5) Applicable only for Tier-I accounts – The NPS is available under two types of accounts, such as Tier-I and Tier-II. The amount invested under Tier-I account is not open for withdrawal till its maturity. So tax benefits are applicable to the account holders under tier-I accounts.
6) Tax benefits for contribution and interest accrued – The investors under the NPS Scheme get tax benefits at the time of contrition or deposit of money in the scheme and interest accrual. The investor would not get tax benefits at the time of withdrawal of money from the NPS account.