National Pension Scheme: Tax benefit under the scheme

The New Pension Scheme is a defined contribution-based pension scheme, launched by the government, which has gone effective from April 1, 2009. One can regularly invest money in this and get a lump sum at retirement and a fixed monthly income for the lifetime.

Tax benefits

NPS is a good bet from tax angle. If you fall in the 30% tax bracket, the NPS investment under Section 80CCD (2) your tax liability will be decreased by almost Rs 15000.

Section 80CCD of the Income-tax Act provides, inter alia, a deduction in respect of contributions made by an employee as well as an employer to the New Pension System (NPS) account on behalf of the employee.

However it cannot exceed one lakh rupees. The allowable deduction under section 80CCD includes both the employee's as well the employer's contribution to the NPS.

Tax benefits would be applicable as per the Income Tax Act, 1961 as amended from time to time.

Recently, India's pension fund regulator has allowed fund managers of the National Pension System (NPS) to invest directly in stocks. The fund management charges have been revised to 0.025% on your invested corpus. Earlier, this charge was just 0.0009% .

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