National Pension Scheme is not completely tax-free but gives you many tax benefits.
The National Pension Scheme (NPS) is not completely tax free. Nevertheless, by investing in it, you get not one but three income tax benefits. According to tax experts, you can claim tax under section 80CCD(1) and 80CCD(1B) under the contribution made to the NPS account. At the same time, the income earned during the continuation of the account is absolutely tax free.
However, at the time of maturity of the NPS account, only 60% of the total amount deposited in it can be withdrawn, which is tax free. Whereas for the remaining 40%, you have to buy an annuity from a life insurance company. In such a situation, the National Pension Scheme is not completely tax-free but gives you many tax-related benefits.
Apart from this, the question always arises regarding NPS whether the investment made by the employer beyond Rs 1.50 lakh is also eligible for income tax exemption under section 80C? Employer contribution to your NPS account is tax free up to 10% of your salary. It also has a maximum limit of Rs 7.5 lakh, which is added by adding NPS, Provident Fund (PF) and superannuation contributions made by the employer.
Here a question emerges that if the employer does not open the NPS of his employee then how can an employee take the tax benefits of NPS? Actually any employee can open his account under NPS. He can claim tax for the contribution made in his account under section 80CCD(1) with a maximum of Rs 1.50 lakh and other eligible items of section 80C.
Changed the rule of exit from NPS investment
Normally you can withdraw money after 3 years of investment in NPS. The subscriber can use 40 per cent of the corpus as annuity (monthly pension) and withdraw the remaining amount simultaneously. However, if the fund is Rs 5 lakh or less, the subscriber can withdraw the entire amount at once. If you withdraw the NPS fund before 3 years, then it will be considered as a premature exit. In this, the subscriber has to keep at least 80 percent of the amount as annuity and can withdraw the remaining amount in a lump sum. However, if the total fund is Rs 2.5 lakh or less, the subscriber can withdraw the entire amount in one go.
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