NPS – Income Tax Benefits – Official communication of PFRDA, which is the NPS regulatory authority – Details Section 80CCD(1), Section 80CCD(1B) and Section 80CCD(2)
As per the letter addressed by PFRDA to Controller General of Defence Accounts on Income Tax Benefits available in respect of NPS (National Pension System / New Pension Scheme) following Income Tax Exemptions are allowed in respect of NPS Subscribers.
1. Contribution made by employees in NPS up to 10% of their Basic Pay and DA can be deducted from Total Income under Section 80CCD(1). Since deduction under this section is covered by Section 80CCE, NPS contribution by employees has to share has to share the maximum limit of deduction of Rs. 1.5 lakh along with other savings such as ELSS, premium towards LIC, Tuition fees paid for children etc
2. In addition to deduction allowed under Section 80CCD(1) detailed above, NPS subscribers can deduct up to Rs. 50,000 from their total income under Section 80CCD(1B) for the investment made in NPS which is voluntary apart from compulsory contribution.
3. In respect of contribution under NPS up to 10% of Basic Pay and DA by the employer, Income Tax exemption is available under Section 80CCD(2). In other words, contribution made by the employer in the NPS account of employee is an income, which can be deducted from the total income to the extent of 10% of Basic Pay and DA.
Here is the Official Commuincation of PFRDA on Income Tax Benefits available in respect of the amount contributed to NPS
Tax benefit available under National Pension System (NPS)
PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY
B- 14/A, Chhatrapati shivaji Bhawan
Qutab Institutional Area,
Katwaria Sarai, New Delhi – 110 016
Fax:011 – 26517507
25th February, 2016
Subject: Tax benefit available under National Pension System (NPS)
You would be aware that under the National Pension System (NPS), the subscribers can avail of tax benefit under Sec 80CCD(1), up to 10% of their salary (Basic+DA) which is capped at Rs.1.50 lakhs under section 80CCE. From FY 2015-16, an additional tax deduction over and above the Rs.1.5 Lakhs, is available only to subscribers of NPS if they invest upto Rs.50,000 in NPS under Sec 80CCD(1B) of the Income Tax Act. Any citizen of India including persons covered under old defined benefit pension scheme can open NPS account on voluntary basis and avail of the tax benefits u/s 80 CCD (1B) by contributing additionally Rs.50,000/- to NPS.
2. This additional tax benefit on investment upto Rs.50000/- provides an opportunity not only to those employees who are mandatorily covered under NPS, but also to all other employees who may be covered under old pension scheme/provident fund/superannuation fund, as well as to any other Indian citizen between 18 to 60 years of age, to avail of this tax benefit by opening an NPS account on voluntary basis and by investing the required amount.
3. PFRDA has provided an easy and convenient way to subscribe to NPS by recently introducing eNPS, which any individual can make use of to join NPS. A new subscriber can adopt the following eNPS methods for joining NOS:
(a) Using Aadhaar card issued by UIDAI which is authenticated through OTP received from UIDAI on the registered mobile of the applicant. In this case, the subscriber can instantly get himself/herself registered. He/she has to simply visit the eNPS module in NPS Trust website at www.npst.org.in.
(b) Using PAN and net banking of the selected bank chosen by the subscriber. In this case KYC verification is done by the Bank. The NPS account gets activated only after KYC verification by Bank. He/she has to go to eNPS module in NPS Trust website at www.npstrust.org.in.
4. A new subscriber can also open an account physically through any of the Points-of-Presence-Service Provider (POP-SP). The list is available on www.pfrda.org.in.
5. Therefore, your employees who are not NPS members can open their NPS account, and make contributions using any of the three options mentioned above. Existing NPS subscribers can also make additional contributions to avail of the tax benefit by using any of the options as stated above.
6. contribution upto Rs.50,000 in NPS for the additional tax benefit in the current year has to be made by 31-03-2016 and it is important that this message be conveyed to all your staff members and employees right upto the level of DDOs/DTOs, at the earliest. This will definitely help in their tax planning.
7. We request you to disseminate the above information to all concerned.
chief General Manager