Who can invest in National Pension Scheme?

Earlier, National Pension Scheme was only applicable for Government employees, but now it is available for other taxpayers too. National Pension Scheme is regularized by Pension Fund Regulatory and Development Authority (PFRDA) on behalf of the government.

Here are a few details you need to know about NPS: -

• Eligibility for NPS

Citizens of India between the age group of 18 years to 60 years are free to opt for this scheme.

• Contribution in NPS

 Minimum amount that can be contributed is Rs. 6,000 per financial year.

However, there is no limit for maximum amount of contribution in a financial year.

• Structure of NPS

National Pension Scheme is divided into 2 tiers they are, Tier I & Tier II.

Tier I: This tier is only for post-retirement purposes, any withdrawal from this account cannot be done. The taxpayer can withdraw entire sum once he retires or attains the age of 60 years. Taxpayer can claim the tax saving benefit only under this tier.

Tier II: Taxpayers can open an account under this tier only if he/she is having an account under Tier I. He/she can withdraw any sum from this account. No tax benefits are available for investments in tier II account.

 Taxation of NPS

Contribution to the National Pension Scheme is deductible under section 80CCD of the Income Tax Act, 1961.

This section is classified under 3 sub-sections as follows:

 Taxpayers own contribution-

• If taxpayer voluntarily contributes to National Pension Scheme (NPS), then deduction from his/her Gross Total Income is allowed.
• Maximum deduction allowed is-

For salaried taxpayers: Lower of Actual contribution or 10% of salary.

For self-employed taxpayers: Lower of Actual contribution or 10% of Gross Total Income.

• As per Section 80CCE of the Income Tax Act, 1961, the aggregate deduction of three sections that is 80C, 80CCC and sub-section of 80CCD is restricted up to Rs. 1,50,000.

 Taxpayers own contribution-

• The taxpayer can claim additional deduction of up to Rs. 50,000 under section 80CCD(1B), for Investment in National Pension Scheme in addition to investment claimed under section. 80CCD (1).
• Taxpayer can claim benefit of total tax saving investments of up to Rs. 2,00,000

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