The last date for making tax-saving investments for FY 2022-23 is near. Know how NPS helps taxpayers
The last date for making tax-saving investments for FY 2022-23 is near. You can do investments in certain tax-saving instruments like PPF, NPS, 5-year FD etc. for claiming deductions till March 31. As the last date nears, here’s a look at one of the best tax-saving investment options that provide unmatched benefits to taxpayers.
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The scheme for unmatched tax benefits is National Pension System (NPS), which is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). Investment in this scheme also helps individuals in arranging sufficient retirement corpus.
According to the regulator, NPS offers multiple benefits of systematic retirement planning, creating a pension corpus along with tax benefits.
“NPS is one of the most customer-friendly and flexible pension plans in today’s time. It is a regulated, professionally managed, low cost, transparent and portable pension plan well suited for any individual,” PFRDA said in a statement.
Unmatched tax benefits and compelling reasons to opt for NPS
Tax Benefit on Investment of Rs 1.5 lakh under Section 80C
The investment made by individual accountholders in their NPS account is eligible for deduction under Section 80C. The total deduction limit under this section of the Income Tax Act is Rs 1.5 lakh and the amount contributed towards NPS can be claimed as a deduction subject to a ceiling of 10% of salary (20% of gross income for non-salaried).
Tax Benefit on Additional Investment of Rs 50,000
NPS also provides an additional tax benefit of Rs 50,000, which is exclusively available to NPS subscribers only. They can claim tax deductions up to Rs 50,000 over and above the deduction under Section 80C. Effectively this translates into a total deduction of Rs.2.00 lakh for NPS subscribers.
Tax Benefits under Section 80CCD(2)
In case an employer contributes towards the NPS account of an employee (subscriber), the employee can avail deductions under Section 80 CCD(2) in addition to the tax benefits available under Section 80C. However, this deduction is subject to a ceiling of 10% of salary or Rs 7.50 lakh.
No Tax on Returns and Maturity Amount
PFRDA says that NPS belongs to the category of one of the few financial products that offer EEE – exempt-exempt-exempt – tax treatment. So NPS subscribers get tax benefit not only on their investments but the returns and maturity proceeds under this scheme are also tax exempt. Another popular financial product with EEE tax treatment is PPF.
Low-cost Product
NPS is one of the lowest-cost pension schemes in the world. According to the regulator, the compounding effect achieved through regular investment and low-cost advantage provides an opportunity to accumulate a higher pension corpus during working life.
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Easy to Invest
Investing in NPS is easy and a subscriber has the flexibility to contribute any amount above Rs 500 anytime. Also, there are no restrictions on the number of transactions one can undertake during a year.
