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How to claim tax benefits on NPS?
May, 11th 2016

Do you know, what all tax benefits can be claimed under (National Pension System) NPS? Do you know there is an additional tax benefit on corporate NPS? What about maturity amount? To simplify things, here is a lowdown on what all tax benefits can be claimed under NPS.

Tax benefits for Individuals

You can claim a deduction of upto Rs1.5 lacs u/s 80CCE of the Income Tax Act. Remember, combined benefit of 80CCE and 80C cannot exceed the limit of Rs1.5 lakh
Additional Tax deduction benefit of Rs 50000 is also available u/s 80CCD (1B) over and above the limit of Rs1.5 lakh

For Employees
Under corporate NPS, an employee can claim up to 10% of gross income under ceiling of 1.5 lacs u/s 80CCE
Additional Tax deduction benefit of Rs 50000/- u/s 80CCD (1B) is also offered over and above sec 80 CCE
You can also claim tax benefit on employer's contribution (upto 10% salary )under 80CCD(2). Under this the income is not included in your taxable income resulting in tax-saving. The benefit is over & above both the sections 80CCE & 80CCD(1B).

For Employers

Contribution upto 10% of basic salary can be deducted as 'Business expense' from profit and loss account of the employer u/s 36.
At the time of Withdrawal

As per the scheme, you could withdraw 60 per cent of your corpus at age 60, and use the remaining to purchase a life annuity. The 60 per cent you withdrew was chargeable to tax earlier. With this budget, 40 per cent of that corpus is free and only 20 per cent is charged to tax. However, if you choose to invest even that 20 per cent in annuity, you have a completely tax-free option, except for the tax liability arising out your annuity income.
Sanjiv Bajaj- MD, Bajaj Capital, says, "The amount received as pension out of investment in annuity will be treated as income and will be taxed. Since employees would not be having other income (most of the cases), there will be hardly any tax or absolutely no tax on it, making NPS complete EEE."

On Death

If the person dies (either at the accumulation or annuity phase) the amount received will be tax exempted in the hands of nominee.

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