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Tax benefits of national pension scheme


Tax benefits of national pension scheme in English - You make many types of investments to secure life after retirement. The purpose of all these investments is different. Many of you who work in the private sector or are self-employed would like to start planning for your retirement from now on.

Keeping this objective of yours in mind, in today's article we will discuss about such investment schemes, by investing in which not only you can secure your retirement but also save your income tax at present.

National Pension Scheme and Atal Pension Yojana, both these schemes will give you the facility of pension after retirement as well as benefit in saving your income tax.

In today's article (tax benefits of national pension scheme in hindi), we will discuss about the benefits of income tax from National Pension Scheme and Atal Pension Yojana.

What is National Pension Scheme and Atal Pension Yojana? what is national pension scheme & atal pension yojna in English

National Pension Scheme (NPS) is a pension scheme of the government which was started for private sector employees and self-employed individuals. One can invest in this scheme after the age of 18 years. And when you turn 60, you will get pension every month.

The amount of pension you get every month depends on your investment, but in this scheme you get more returns than PPF.

Atal Pension Yojana was started in the year 2015 and it is also a government pension scheme like the National Pension Scheme. The account can be opened in this scheme between the age of 18 years to 40 years and has to be invested in it for at least 20 years.

An advantage of investing in Atal pension scheme is that it is also invested by the government. In this, 50 percent of your investment or Rs 1000 per month, whichever is less, is invested by the government.

Income tax benefits available on own investment in Atal Pension Yojana and National Pension Scheme (Section 80CCD(1) in English)

If you invest in National pension scheme or atal pension yojna, then you will get its tax exemption under Section 80CCD(1). The exemption of section 80CCD(1) will be available with the exemption of section 80C. That is, the total exemption including section 80C and section 80CCD(1) cannot exceed 1.50 lakhs.

For example, if you are getting deduction of Rs 20,000 in section 80CCD(1) from investment in National Pension Scheme or Atal Pension Yojana and also getting exemption of Rs 1,40,000 from LIC, PPF and other investments, So you will get total income tax exemption of 1.50 lakh only.

How to Calculate Income Tax Deduction in Section 80CCD(1) –
If you are Employee – 10% of salary ( salary +DA )
If you are self employed – 20% of gross total income

Additional Exemption – Section 80CCD (1B)

To promote investment in Atal Pension Yojana and National Pension Scheme, additional exemption of income tax was made by the government so that more and more people invest in it. This additional exemption is given in section 80CCD(1B) . An additional exemption of Rs 50,000 can be taken in this section. This exemption will be outside the limit of 1 lakh 50 thousand under section 80C. That is, the total exemption of section 80CCD(1B) and section 80C and section 80CCD(1) can be taken up to 2 lakhs.
example – Section 80CCD(1B) clarification in English

Suppose you have total exemption of section 80C is 1 lakh 30 thousand and investment exemption in National Pension Scheme or Atal Pension Yojana is 60 thousand, then income tax exemption will be claimed by you in the following manner –

Particular Amount
section 80 C1,30,000
Section 80CCD(1) – National Pension Scheme or Atal Pension Yojana20,000
total deduction1,50,000
Additional deduction ( section 80CCD(1B) ( 60000 -20000 )40000
Total deduction1,90,000 

In this way we can save income tax by claiming additional exemption in this section.

Employer's Contribution Exemption (Section 80CCD(2) of Income Tax Act in English) –

If you are an employee and along with your investment in the National Pension Scheme, the investment is also done by your employer, then you will also get the exemption. The exemption of contribution to the National Pension Scheme of the employer can be availed under section 80CCD(2).

The exemption in this section is in addition to the exemption limit mentioned above. That is, in addition to the exemption of 2 lakhs available on the employee's own contribution. In this section, the employee can take exemption of the contribution made by his employer, but the maximum exemption can be taken only up to 10 percent of his salary.

However, exemption under section 80CCD(2) cannot be taken by a self-employed person.

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