Navneet Singal
National Pension scheme: Additional Deduction of Rs. 50,000/-. Whether further clarification is required?
A retirement plan is an arrangement to provide people with an income during retirement when they are no longer earning a steady income from employment. Retirement plan ensures that people live with pride and without compromising on their standard of living during advancing years. Pension scheme gives an opportunity to invest and accumulate savings and get lump sum amount as regular income through annuity plan on retirement.
The National Pension System (NPS) was launched by Government of India on 1st January, 2004 with the objective of providing retirement income to all the citizens. NPS aims to institute pension reforms and to inculcate the habit of saving for retirement amongst the citizens.
Initially, NPS was introduced for the new government recruits (except armed forces). With effect from 1st May, 2009, NPS has been provided for all citizens of the country including the unorganized sector workers on voluntary basis.
Currently, Investment in NPS can be made by the following sectors:
1. Central/State Govt. Employees
2. Corporates
3. All Citizen Model (Individual)
4. Unorganized Sector Workers
Every subscriber to NPS will be allotted a unique Permanent Retirement Account Number (PRAN). This unique account number will remain the same for the rest of subscriber’s life. This unique PRAN can be used from any location in India. It will provide excess to investment in two type of accounts:
1. Tier I Account: This is a non-withdrawable account meant for savings for retirement. (Tax benefit is available). Withdrawal is possible after 10 years of opening account or at the age of 60 whichever is earlier
2. Tier II Account: This is simply a voluntary savings facility. The subscriber is free to withdraw savings from this account whenever subscriber wishes. No tax benefit is available on this account.
NPS is an EET Scheme which means exempt at the time of investment, exempt at the time of appreciation and Taxable at the time of withdrawal.
Tax benefit provided under Income Tax Act, 1961 can be described as follows:
Tax Benefits At the time of Contribution in National Pension Scheme
Tax benefits to employer:
Contributions made by the employer (upto 10% of Basic + DA) is allowed as a business expense under Section 36 (1) (iv) (a) of Income Tax Act 1961
Tax benefit to employee:
Employer’s contribution – Eligible for tax deduction upto 10% of Salary (Basic + DA) contributed by employer under sec 80 CCD (2)
It is to keep in mind that this contribution is not included in overall limit of Rs. 1.5 lakhs as mentioned u/s 80CCE. It means that if any employee has basis salary of Rs. 30,00,000/- and his employer contribution Rs. 3.00 lakhs, he can get a deduction of Rs. 3.00 lacs u/s 80CCD (2). It can provide lot of tax benefit to employees under higher salary brackets.
Employee’s contribution – Eligible for tax deduction upto 10% of Salary (Basic + DA) under sec 80 CCD (1) within the overall ceiling of Rs. 1.5 Lac under Sec. 80 CCE.
Contribution by assessee (other than employee)- Eligible for tax deduction upto 20 % of his gross total income of the previous year (wef A.y 2018-19) under sec 80 CCD (1) within the overall ceiling of Rs. 1.5 Lac under Sec. 80 CCE.
Further w.e.f. FY 2015-16, in addition to the deduction u/s 80 CCD (1), deduction of Rs. 50,000 has been on contribution in NPS. (U/s 80CCD(1B))
It is to further clarify that if an corporate has not opted for the corporate plan and employees are making investment under the all citizen model i.e. on their individual basis, even in that case investment made by them can be claimed by the employee and the employer is liable to provide deduction u/s 80CCD (1) and u/s 80CCD (1B) to the employee under form 16.
In other words, it can be mentioned that an employee can claim overall deduction of Rs. 2,00,000/- (i.e. Rs. 1,50,000/- u/s 80 C/80CCC/80CCD(1) and Rs. 50,000/- u/s 80 80CCD(1B))
However, if we go through the provisions related to Pension Plan i.e. 80CCD literally, some ambiguity can’t be denied. New inserted provision 80CCD (1B) reads as follows :
“(1B) An assessee referred to in sub-section (1), shall be allowed a deduction in computation of his total income, whether or not any deductions is allowed under sub-section (1), of the whole of the amount paid or deposited in the previous year in his account under a pension scheme notified or as may be notified by the Central Government, which shall not exceed fifty thousand rupees:
Provided that no deduction under this sub-section shall be allowed in respect of the amount on which a deduction has been claimed and allowed under sub-section (1).
It means that additional deduction of Rs. 50,000 is in addition to the deduction allowed under sub-section (1). It can have two meanings
1. Additional deduction is after completion of 10%/20% limit as provided u/sub section of 80CCD.
2. Addition deduction is over & above the ceiling limit of Rs. 1,50,000/- as defined u/s 80CCE.
It I interpret as per point no. (1), to get additional deduction of Rs.50,000/-, I have to invest in NPS more than 10% of my basic salary wherever as per point no. 2, any investment in NPS can be considered as additional depreciation.
However, in the Budget Speech given by FM in the Lok Sabha, it is clarified by the example cited in the speech that the assessee can claim additional deduction even though he is within the limit of 10% of basic salary/20% of GTI, still it is better to clarify the situation by issuing a circular in this regard.
Taxation at time of withdrawal of money from pension fund
Where any amount standing to the credit of the subscriber in respect of which a deduction has been allowed together with the amount accrued thereon, if any, is received by him or his nominee, in whole or in part, in any previous year,—
(a) on account of closure or his opting out of the pension scheme; or
(b) as pension received from the annuity plan purchased or taken on such closure or opting out,
the whole of the amount referred to in clause (a) or clause (b) shall be deemed to be the income of the assessee or his nominee, as the case may be, in the previous year in which such amount is received, and shall accordingly be charged to tax as income of that previous year.
However, wef A.y 2017-18, if the amount is received by the nominee on the death of the assessee [on account of closure or his opting out of the pension scheme clause (a) ] shall not be deemed to be the income of the nominee.
Wef A.y 2017-18 : Any employee (who contributes to NPS) is allowed an exemption in respect of 40% on the total amount payable to him on closure or his opting out of the pension scheme u/s 10(12A)
Wef A.y 2019-20 the benefit of section 10(12A) shall be extented to non-employee as well.
Wef A.y 2018-19 any payment from the National Pension System Trust to an employee under the pension scheme referred to in section 80CCD, on partial withdrawal made out of his account in accordance with the terms and conditions, specified under the Pension Fund Regulatory and Development Authority Act, 2013 (23 of 2013) and the regulations made there under, to the extent it does not exceed twenty-five per cent of the amount of contributions made by him shall be exempt u/s 10(12B)
Further, the subscriber shall be deemed not to have received any amount in the previous year if such amount is used for purchasing an annuity plan in the same previous year.
(Author may be contacted at [email protected] )
Read Other articles from Navneet Singal
(Republished With Amendments)
Author Bio
Tier II IS NOT ELIGIBLE
Sir,
I am working in state government. My NPS contribution (10% of basic) is Rs. 75,000. Can I split this amount to get additional tax benefit by showing Rs. 30,000 towards savings of Rs. 1,50,000 and remaining Rs. 45,000 towards additional tax benefit.
Sir,
I am a central govt employee contributing Rs. 55,000/- in the NPS as mandatory employee contribution, Can I claim this amount u/s 80CCD 1B instead of 80CCD(1) and invest in other instruments for completing my limit of Rs. 1,50,000/- u/s 80C. Alternatively is 80CCD 1B valid for mandatory contribution as well?
I have saved Rs. 150Lakh u/s 80C. I want benefit of Rs.50,000 u/s 80CCE. For your kind information, I am a State Government Employee. Please inform me in Detail how can I get this benefit.
Thanks and Regards,
Please kindly inform to me the following details
1. How can I open this PRAN ?
2. Where I can open this PRAN ?
3. If I will have deposit Rs50000/- per year then what amount will received per month after my retirement ?
4. I am now 49 years old. Can I availed this benefit ?
5. I am a Central Govt. employee.
I have a query. Whether investment in Tier I or Tier II or BOTH is eligible for deduction u/s 80CCD?
Please clarify……..
I m confused if PF based components is considered or only Basic+DA for NPS exemption
Sir,
My saving details etc are as follows
Item 1) LIC+PPF+CGEIS = 1.8Lakh
Item 2) Individual Contribution to NPS as i am a central govt. employee (deducted from my Salary) = 155000
Item 3) Employers Contribution to NPS (govt. contribution) = 155000
Now I can claim savings mentioned under item 1 for 80C (limited to 1.5 Lakhs)
NPS contribution by employer is default comes under 80CCD (2).
Now my query is-
1)Savings shown under item no.2, will come under 80CCD 1(B) or it will fall under 80CCE which will give me additional tax benefit?
2)Do I need to contribute additional Rs.50,000 to claim benefit under 80CCE?
3)How much deduction I can claim on basis of above investment?
Kindly clarify.
Thank you
– Shailendra
Sir,
My saving details etc are as follows
Item 1) LIC+PPF+CGEIS+Hosing Loan Principal = 1.7 Lakh
Item 2) Individual Contribution to NPS as i am a central govt. employee (deducted from my Salary) = 45000
Item 3) Employers Contribution to NPS (govt. contribution) = 45000
Now I can claim savings mentioned under item 1 for 80C (limited to 1.5 Lakhs)
NPS contribution by employer is default comes under 80CCD (2).
Now my query is-
1)Savings shown under item no.2, will come under 80CCD 1(B) or it will fall under 80CCE which will give me additional tax benefit?
2)Do I need to contribute additional Rs.50,000 to claim benefit under 80CCE?
Kindly clarify.
Thank you
Pallab Goswami
please clarify the following
1.additional contribution to NPS u/s section 80cc(1B) is over and above the 10% of salary
2. after attaining superannuation 60% of corpus fund withdrawal is taxable or not
3. additional contribution to tire -1 a/c how i should proceed
i want clarification on the circular issued by income tax department on dated 2 Dec 2015 regarding Total Deduction under section 80 that total deduction is 1,50,000 but if an employees is under NPS scheme and his contribution for pension scheme under section 80CCD (1B) is 10% i.e.of his salary more than 50,000 then what amount he has to deduct for the AY 2016-17 Rs 1,50,000 or 1,50,000+50,00=2,00,000 kindly make it clear to me at your earliest please.
it is mentioned in page 33 of said circular——-
It is emphasized that as per the section 80CCE the aggregate amount of deduction under sections 80C, 80CCC and Section 80CCD(1) shall not exceed Rs.1,50,000/-. The deduction allowed under section 80 CCD(1B) is an additional deduction in respect of any amount paid in the NPS upto Rs. 50,000/-. However, the contribution made by the Central Government or any other employer to a pension scheme u/s 80CCD(2) shall be excluded from the limit of Rs.1,50,000/- provided under this section.
please clarify whether the 60% amount withdrawable after attaining the age of 60 years is taxable or not. My doubt is whether this scheme is under EEE model or EET model.
Sir,
My saving details etc are as follows
Item 1) LIC+PPF+CGEIS+Hosing Loan Principal = 2.3 Lakh
Item 2) Individual Contribution to NPS (deducted from my Salary) = 85000
Item 3) Employers Contribution to NPS (govt. contribution) = 85000
Now my understaing is
I can claim savings mentioned under item 1 for 80C (limited to 1.5 Lakhs)
NPS contribution by employer is default comes under 80CCD (2).
Savings shown under item no.2, my own contribution, I can claim under 80CCD 1(B).
Is my understanding correct or do I need to contribute additional Rs.50,000 ?
Please clarify
Thank you
M Ravi Kumar
what is the procedure if pran no is alloted after a year of joining?
Hi,
My employer in deducting NPS from salary direct which is over and above 150k on exemption.
I want to invest in additional 50k in NPS for which I will extra benefits. I want to know in which account it is deducible it is on Tier-1 or Tier-2 account, so I can invest accordingly.
Thanks,
Amit
I have Saved 1,50,000/- under 80c/80ccc/80ccd(1).How can I save another 50,000/- under 80ccd(1B).Please give valuable information.
Whether Senior Citizen can invest in such a scheme?
Sir, if i am already having other investments like lic, ppf etc (except nps) amounting to rs. 1.5 lacs, my 80cce limit is exhausted. My employer is deducting 10% of my salary eveey month which amounts to approx rs. 80000 per year. Can i claim deduction of 80CCD(1) for rs. 50000 on this nps amount OR i have to invest rs. 50000 over and above the employee deduction to get this benefit?
Pavan lodha
Only 1.5 lac is total limit even Rs. 3 lacs deduction for employee with 30 lac salary.
dear Navnit ji, we can invest Rs 50k or more in NPS and what would be pension amount if deposited 1lac for 5 years
Whether we can withdraw whole amount after5 year or nominee would be paid for the balance after death of contributor.
I will appreciate if you kindly explain in simple way.
best regards
Harishankar
Could anyone clarify if following understanding for tax exemption is right in all 3 scenarios listed
Annual Basic – 3,00,000
PPF/PF – 1,30,000
NPS (online bank site payment) – 70,000
NPS- Payroll deduction <= @10% basic
(No contribution by employer) – 30,000
In this case I get tax exemption under 80CCC – 1,50,000 for PPF/PF. Queries are :
1) Do I get tax exemption under 80CCC for Rs 20,000 (1,50,000 – 1,30,000) against online bank site payment ?
1) Do I get tax exemption under 80CCD(1B)for Rs 50,000 against online bank site payment?
2) Do I get tax exemption under 80CCD(2) for payroll deduction of Rs 30,000 though employee is not contributing anything from his own pocket?
Hi,
The Query Is Regarding Tax Planning Using NPS.
As NPS Contribution (Upto 10% Of Basic + DA) By Employer Is Not Included In Taxable Income Of Employee, Are There Any Companies Who Are Planning Such Sort Of Tax Planning Where NPS Contribution By Employer Is Made Part Of Employees Salary (I.E. It Is Made A Part Of CTC) . Any Special Conditions For Such Practice (Like Board Approval, Special Resolution, Revision Of Employees Compensation Letters Etc)
Please Share The List Of Big Corporates, MNC’s & PSU’s Following Such Practice.
I am investing in insurance,PPF and claiming deduction under Rs.1,50,000/= under 80C.Should I open an NPS account and invest Rs.50,000/= to get further deduction undr 80CCD(1B)?
Regards
Dear Sachin,
Deduction of employee/individual contribution u/s 80CCD (1B) & and deduction of employer contribution u/s 80CCD (2) is exclusive of deduction u/s 80C.
Thanks & Regards,
Navneet.
Dear Sukhen Sarkar,
You can get deduction u/s 80CCD (1B) of Rs. 50,000/- on your investment in NPS.
Regards,
Navneet Singal
Dear Shivam agrawal,
You can get addition deduction u/s 80CCD (1B) of Rs. 50,000/-.
Regards,
Navneet
Dear JAI,
Your observation is right.
Regards,
Navneet
Dear mangesh kolapkar,
There is no Maximum Limit of Investment in NPS. However, there is limit for Deduction under Income Tax for NPS.
Regards,
Navneet
Dear Ajit Kumar,
Deduction u/s 80CCD (1B) of Rs. 50,000/- is in addition to deduction of Rs. 1,50,000/-. In respect of other procedural issues, you can get all of the answers at PFRDA site.
Regards,
Navneet
Dear Arun Kumar,
Deduction for Investment in NPS is available to all individuals whether he is an employee or not.
Regards,
Navneet Singal
Dear vnnmurthy
NPS is totally different from CPF. So, deduction u/s 80CCD(1) or u/s 80CCD(1B) will be available.
Regards
Navneet
Sir ,
I would like to know the govt servant opted in CPF and as such he will not be getting Pension after retirement But at the time of retirement he will get lum sum of cpf accumulated .If The employee contributes for this national Pension scheme ,Then is he eligible for additional 50000 tax rebate or not ? because he is getting tax benefit for his 10% of his basic + GP contribution towards CPF own contribution .please clarify.
Dear Sir,
I am in the teaching job for last 28 years in a West Bengal Higher Secondary school fully aided by the Govt. of West Bengal (our salary is paid by the State – Govt). I bought an LIC policy Jeevan Suraksha in 2001 (Annual Premium Rs 10,606). Am I eligible for the NPS (u/s 80 CCD) for availing another benefit of Rs 50,000.00 in I T in FY 2015-2016.
Please enlighten me in this regard.
Thanks a lot.
I have made application to NPS through SBI with Rs. 150000/- and initially debited the amount after 1 month massage had been received by me that your NPS acc have Rejected” and they credited the total amount to my account.
Not mentioned any reason for rejection and Main SBI Branches dont know about NPS
Then Why this NPS introduced by Govt, Time waste and Money Waste process
Better to not to introduced this type of felicities as govt has failed to maintain through their employees.
Padmaja Rayala
Chartered Accountant
7306906789
I’m a self-employed professional filing ITR every year.My age is 56 years.
Please confirm:
1. If, I’m eligible for NPS ?
2. What is the min & max amount I can deposite per year ?
3. If, I’ll get exemption on that amount in addition to 1.5 Lacs ?
4. Tenure of deposite ?
5. What will be the GOVT’s contribution ?
6. Where can I open that a/c ?
7. When & how I’ll get back the refund ?
Thanks & Regards.
How can I deposit 50,000/- rs in NPS when it is clearly written that maximum contribution is 12,000/-.
LIMIT OF RS. 150000 FOR SEC 80 CCE IS INCLUSIVE OF 80C, 80CCC AND 80CCD SUB SEC (1) ONLY. NOT THE SECTION 80CCD SUB SECTION 1B. IS THIS CORRECT ? KINDLY CLARIFY.
Dear sir
Plz clarify that, if our investment in NPS is beyond d exemption limit i. e. 150000. While we have invested within prescrived rate 10%. Then exemption of such extra investment can be avail from additional exemption amount 50000 or not.
For list of pop-sp in your district , kindly visit the website of nps.How ever it is true that many authorised banks are not aware about the rules of nps .
Dear Nabaneetji
I have gone through the content of the clarification given by you.But still I am in confusion.
My monthly basic+salary is Rs.69500.00.My monthly PF subscription is Rs.15000.00.
Now,tell me if I invest Rs.50000.00 per annum,whether I shall get the benefit of additional benefit of deduction of Rs.50000.ok u/s 80CCD(1B).
sir
please clarify
whether it can be opened in Post office or which Nationalized bank
how many years we need to deposit
when we will start getting bk the amount
how much money every month will be getting
where we can get detailed brochure
what is the age limit to contribute
plz let us know
rgds
LIC & PF 1,50,000. in the scheme to be notified 50000 will be invested. then can assessee claim 200000 deduction.
Sir
the said nps may useful for salary class only. There is no awarnes and careful from on organised workers. They willnot worry about the tax matters.The said scheme mayuseful of epf benifit
Please clarify the following:
1. sec 80 – we can do upto 150000 in NPS
2. Sec 80ccd- contribution by employer, additional to no. 1 above
3. additional 50000 can be invested under 80 ccd (b) over and above 1 & 2 above
Am I understood correctly?
Most of the announcements coming from the Fin Minister are half baked. Examples: Sukanya Samrudhi, KVP and now this Pension scheme. The FM never specifies to which age group, where all the scheme will be operatedd and what is the ultimate pros and cons etc which people are eager to learn from a single window i.e. the GOI. Instead GOI is behaving like a big “AAP agent” with a “Huge Jhadu” to mop up whatever money is left out there with you.
Instead of putting Rs 15 lakhs as promised in every one’s pocket GOI is trying to scrape the crumbs. GOI should be more decent.
Such piecemeal announcements are meaninbgless and lowers the credibility of the entire Govt Machinery. If this kind of listlessness contines unabated, people will soon start singing Jana Gana Mana for the BJP Govt. RaGa can lift up his collar and await the PM ship.
Dear Sir,
You have mentioned that the scheme is open to all citizens. It is not so. Whether Senior Citizens can contribute? I do not think so, for there is age restriction.
Kindly be specific without giving rise to ambiguity.
Ravikumar
Dear Mr. Pratik,
in order to be eligible for addition deduction u/s 80CCD (1B), some amount is needed to be invested in pension scheme u/s 80CCD (1) which will be under the overall limit of investment u/s 80CCE of Rs. 1.50 Lacs. The additional amount of pension shall qualify for deduction u/s 80CCD(1B) after exhausting aggregate deduction of Rs.1.50 Lacs.
The provision has been made for boosting the investment in pension scheme for future security of an individual.
KK Sarawagi
Dear Navneetji,
I think you have misunderstood provision, You should note that section 80CCE is overriding section to section 80C, 80CCC, and 80CCD. Hence, no person can claim dedcution under all these section over and above Rs. 1.5 lakhs. Further, Fianace Bill, 2015 as approved by president of india also provides amendement made in newly insterted section 80CCD(1B). Now the line “, [in addition to the deduction allowed under sub-section (1)” is replaced by “whether or not any deductions is allowed under sub-section (1)”. This requires reconsideration of your analysis. Upto my understanding, it is for the purpose of extending additional deduction upto Rs. 50000 in case where condition of 10% of Salary keep amount eligible for deduction u/s 80CCD(1) below threshold of Rs. 1.5 lakh. In no case overall deduction can exceed Rs. 1.5 lakhs. Kindly Confirm this by leaving reply to this comment so that readers does not get misleded. or else give me your views on my understanding.
Please let us know which bank will be opening this account because none of the banks are aware of this type of account so far.
Under 80CCD(2) if basic salary + DA of an employee is Rs.30 lacs then the maximum exemption is for Rs.3 lacs – 10% of basic salary + DA for contribution by employer