National Pension System New Guidelines/Tax Benefits
Who can open an account
Central government employees
State Government Employees
Private sector employees
Now the Pension Fund Regulatory and Development Authority (PFRDA) has released new guidelines for the National Pension System (NPS) Tier-II Income Tax Saving Scheme under Section 80C. Under the NPS Tier-II scheme, only central government employees are eligible to get the benefit of income tax. This is in addition to the income tax benefit present under the Tier I NPS scheme.
NPS Tier II – Tax Saver Scheme, 2020 Account
3 year lock in the period: Only NPS subscribers of the central government will be eligible for this. The contribution made by a central government employee to the TPS-II account of NPS up to Rs 1.50 lakh every year will remain in the lock-in period for 3 years. There will be no withdrawal in this 3-year lock-in period. However, in the event of the death of the subscriber, the nominee or legal heir can withdraw the money.
3 accounts: Central government employees who want to get the benefit of this tax can have three NPS accounts. Tier-I (Mandatory Account), Tier-II (Optional and Independently Withdrawal) and Tier-II Account which will be Optional Account. There will be benefits under section 80C, but it requires a lock-in period of 3 years.
No Choice for Investment: This is a composite scheme, in which the subscribers will not have choices for investment. It invests 10 to 25 percent in equities, 90 percent in debt segment and 5 percent in cash, money market or liquid funds.
Private and government employees benefit
50,000 deduction (rebate) is given under section 80CCD (1B) on contribution made to NPS Tier 1 account. This exemption is in addition to deduction under Section 80CCD (1) on contributions up to Rs 1.5 lakh. But it needs to be kept in mind that the exemption amount under Section 80C, 80CCC (Investment in Pay Pension Plan given by an Insurer) and Section 80CCD (1) (NPS) is 1.5 lakh in a fiscal year. Should not be more than Rs.
If an NPS subscriber adopts the new income tax slab or rate option with effect from this April, then a deduction of 50 thousand rupees available under section 80CCD (1B) or a rebate of 1.5 lakh rupees available under section 80CCD (1) and section 80C The exemption will not apply. If you do not choose the tax slab, then the old tax rule will apply to you.
How to open an NPS account?
- To open an NPS account offline or manually, one must first search for the PoP-Point of Presence (may also be a bank).
- Take a Subscriber form from your nearest PoP and submit it with KYC papers.
- Once you make the initial investment (Rs 500 or Rs 250 monthly or not less than Rs 1,000), PoP will send you a PRAN – Permanent Retirement Account Number.
- With the help of this number and password, you can run your account.
- For this process, the one-time registration fee of Rs.125 will have to be paid.
- FD rates of 5 banks of the country, know how much interest you are paying on how many years
If you connect your account with your PAN, Aadhaar / or mobile number, then opening an online account is easy. You can validate the registration using the OTP sent to your mobile. After this, you will get a PRAN (Permanent Retirement Account Number) with the help of which you can log in to NPS.