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What is the National Pension Scheme?
The NPS is a government-sponsored pension scheme launched by the Pension Fund Regulatory and Development Authority (PFRDA).
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Is it only for government employees?
NPS was earlier launched only for government employees. But now, any employee or self-employed person can open an account and avail NPS account tax benefits and other benefits.
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What is NPS Corporate Sector Model?
In 2011, the PFRDA launched a different model for corporate employees, called the NPS Corporate Sector Model.
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What are the features of NPS Corporate Sector Model?
- It is very low cost. In fact, the cost is one of the lowest for pension schemes in the world.
- It can be transferred from one job to another.
- The employee has the flexibility to select the Fund Manager, Point Of Presence, annuity scheme, investment option, and annuity service provider.
- All transactions, fund status, and NAV can be easily tracked online.
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Can employees avail tax benefits under NPS scheme for the private sector?
Yes, private sector employees can also avail tax benefits under NPS Corporate Sector Model.
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What are the NPS account tax benefits for employee contribution?
- Investment of not more than 10% of (basic salary+DA) is tax-deductible under section 80CCD(1), upto a limit of ₹1.5 lakh.
- Over and above this limit of ₹1.5 lakh, an additional deduction of ₹50 thousand is deductible under Section 80CCD(1B).
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What are the NPS account tax benefits for the employer’s contribution?
Under Section 80CCD(2) of the Income Tax Act, an investment amount of not more than 10% of (basic salary+DA) is tax-deductible. In this case, there is no maximum limit for the amount.
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Is the withdrawal amount of NPS scheme for private sector tax-deductible?
Out of the maximum 60%, upto 40% of the withdrawn corpus is tax-deductible.
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Is the amount invested in annuity tax-deductible?
No, the pension earned from annuity investment is treated as an income and is taxed accordingly.
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Is pension received tax-deductible?
No, the pension earned from annuity investment is treated as an income and is taxed accordingly.
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What is NPS Tier II account?
NPS Tier II is not a retirement account. It offers voluntary savings and any-time withdrawal option. Employee can also avail fund management service at low costs.
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Are there tax benefits for NPS Tier II account?
Under Section 80C, government employees are eligible for tax benefits if they keep the investment for 3 years. Private sector employees and self-employed persons do not get any tax benefits.
Can non-government employees avail the tax benefits of NPS?
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