Investing in NPS

General
1

Hi

I have not invested in NPS before.
And, my employer does not contribute to NPS.
So, if I invest 50K per annum in NPS, will my taxable income reduce by 50K (or) my taxable income will be reduced by only 10% of Basic irrespective of my investment? Pls clarify…

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2

In NPS there are two options Tier 1 and Tier 2. Tax exemption is available only if you invest in Tier 1. This also means that once invested, you can withdraw only when you reach 60 years.

Now, with regard to deduction. The maximum limit of exemption is Rs. 2.00 Lakhs

To answer your question, you will be eligible for deduction upto 2 lacks from all tax saving investments.

Section Description Maximum Deduction
80C Tax-saving instruments and investments Up to ₹ 1,50,000*
80CCC Contributions to annuity and retirement plans
80CCD(1) Employee contributions to NPS/ Atal Pension Yojana up to 10% of salary + dearness allowance
80CCD(2) Employer contributions to NPS/Atal Pension Yojana Up to 10% of Basic + + Dearness Allowance
80CCD(1B) Self-contributions to NPS and Atal Pension Yojana above the Section 80CCD(1) limit Up to ₹ 50,000*
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3

Tax exemption is available only if you invest in Tier 1 not Tier 2.

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4

Thank you. Yes you are right. Corrected my earlier post.

5

Thanks for your suggestions.

Can I invets all 2L in NPS per year ? How to open an NPS account ?

6

You can open NPS account online or through your bank. Most of the banks will assist in opening NPS account. Please note 2 L is the total deduction available. I would prefer opening the account through a Bank as they will do and submit all the docs that is required.

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