The National Pension System (NPS) is one of a kind market-linked retirement instrument available for Indian citizens. If one is able to invest small amounts for long time, their retirement can be a cool breeze, at leats financially.
Besides saving up for retirement, NPS also ensures significant tax benefits for individuals. If you have an NPS account and are yet to file ITR for FY21, here are some tax benefits that you can avail from it.
Foreign investors trading in American depository receipts (ADRs) or Global depository receipts (GDRs) of Indian companies need not pay capital gains tax, the report said.
For salaried employees, those who contribute any amount to their NPS account within a single financial year are eligible for a deduction up to 10% of their basic pay from their total salary Non-salaried individuals can claim deduction up to 20% of their total income.
Further, section 80CCD(1B) enables deduction of Rs 50,000 in addition to the Rs 1.5 lakh allowed by Section 80CCE. In a financial year, a taxpayer can seek a total of Rs 50,000 as tax breaks under section 80CCD (1B).
The tax advantage of Rs 50,000 is in addition to the benefits provided under sections 80CCD (1) and 80CCD (2).
Thus, if a taxpayer has already touched the Rs 1.5 lakh limit under section 80CCE without NPS, self- or employer-made contributions to NPS can be used to claim an additional deduction of Rs 50,000 under section 80CCD (1B).
You can also claim tax advantage under 80CCD (2) against contributions made by the employer on your behalf. Such contributions are deductible under section 80CCD (2) of the Income Tax Act, up to a maximum of 10% of basic pay in a year.
This is an added deduction alongside the one given for employee contributions and is not subject to the total maximum of Rs 1.5 lakh set by section 80CCE and 80CCD (1B).
Taxpayers are allowed to withdraw some funds from their NPS Tier-I account before crossing the age of 60 for any kind of an emergency use.This amount remains tax-free provided it is up to 25% of the contribution made by the subscriber.
Meanwhile, the amount contributed for purchasing an annuity is also tax-free. The annuity income received by you is subject to tax in the subsequent years as per your tax slab.
