National Pension Scheme (NPS) & Income Tax benefits

National Pension Scheme (NPS) India is a voluntary and long-term investment plan for retirement under the purview of the Pension Fund Regulatory and Development Authority (PFRDA) and the Central Government.

Tax benefit to Employees:

Employees who contribute to NPS are eligible for the following tax breaks on their contributions:

1. a) Tax deduction of up to 10% of pay (Basic + DA) under Section 80 CCD(1), subject to a maximum of Rs.1.50 lakh under Section 80CCE.
2. b) A tax deduction of up to Rs. 50,000 under Section 80 CCD(1B) in addition to the overall limit of Rs.1.50 lakh under Section 80CCE.

Perquisite threshold:

Section 17(2) provides that in case aggregate of employer’s contribution towards employee’s employee provident fund, National Pension System and Superannuation exceeds seven lakhs fifty thousand in a year, the excess shall be taxed as perquisite in the hands of the employee.

Benefit to Employers: