This is tax season now. You may be planning to do investment for FY 2018-19. This will help in Tax Deduction .Due date may be nearing in your company to submit investment proof . National Pension Scheme – NPS is good investment for overall tax benefit and return . This post will give you information , How National Pension Scheme – NPS can give benefit up to 42% in first year .
In most of case availability of Deduction U/S 80C of Rs. 1,50,000 sounds very less as most of deduction is covered by P.F. , Tuition fees , Home loan Principal and insurance. No need to worry , you can invest and claim additional Rs.50,000 in NPS as per Section 80CCD(1B) . You have to open Tier- I NPS Account.
I assume that if you don’t make investment in NPS , you have to pay tax on this Rs. 50,000 at prevailing tax rate in your case.
- You can deposit Rs.50,000 in NPS which can result in saving of Rs. 15,000 income tax if you are in 30% slab (Heath and Edu. Cess of 4% is additional benefit however for ease of understanding and calculation , this is ignore).
- As per recent amendment, one can put up to 75% in equity fund up to 50 years of age which is generating return around 17% to 18% (CAGR- Last 5 years) You can visit and verify below link to check performance of all eight funds in equity, Government Bond and Corporate debt fund .https://www.livemint.com/Money/sdQvfZ5whusqqCnsnhTNeO/Top-performing-NPS-schemes-Here-is-a-comparison.html
- Even if you expect overall return @ 12% p.a. , Total benefit is 42 % in first year ( 30% tax + 12% return) .
- In case you are in 20% tax slab, total benefit is approx. 32% in first year (20%+12%). This is over and above Rs.1.50 Lakh deduction U/S 80C. Minimum investment of Rs.6,000 p.a. required under scheme.
- This is Exempt – Exempt- Exempt investment so investment under NPS is available as deduction , return earned on investment is exempted and at the time of retirement , it is exempted. At the time of retirement 60% amount can be withdrawn tax free and balance 40% need to keep in annuity.
- One can withdraw amount from this account only at retirement .
- You have to compulsorily invest 40% corpus in annuity .
You have to generate PRAN to start investing in National Pension Scheme – NPS . You can generate it either visiting below mention offline centers or you can instantly open NPS Account through PAN with eNPS website as provided below.
E-NPS : To open account online:
NPS offline centers:
You can search nearest center or you can contact your Relationship Manager of your bank.
Objective of this post is to create awareness regarding investment in NPS. This will give very good retirement corpus and fix flow of income apart from tax benefit during investment.
Disclaimer : Investment in equity and other funds are subject to market risk. Please take informed decision for investment in NPS or you can take professional advise for investment.