Tax Benefits in National Pension System for Self Employed and Salaried Individuals

Date Published: April 8, 2022

National Pension System (NPS) helps you plan for your retirement and allows you to save tax. National Pension System offers exclusive tax benefits over and above 80C limit whether you are self-employed or salaried individual. Further if your 80C limit is not exhausted, you can still invest in National Pension System to avail tax benefits under 80C.

Section 80C of Income Tax Act helps you to avail tax benefits up to in various investments made by you like, Life insurance premium, Public Provident Fund, Employee Provident Fund, National Saving Certificate, Equity Linked Saving Scheme, ULIPs, Sukanya Samriddhi Yojana, Tax saving Fixed deposit, Repayment of Home Loan, Payment towards Children’s Fees, Infrastructure Bonds, NABARD Rural Bonds, Senior Citizen Savings Scheme and National Pension System.

Let us understand the Tax benefits in NPS for self-employed individuals separately for 80c limit exhausted and not exhausted.

In case you have exhausted your 80C limit and you are a self-employed individual. Then you can invest up to ₹50,000 and avail tax deductions u/s 80CCD (1B) of Income Tax Act, 1961. This tax benefit is over& above the tax benefits claimed by you for your investments of up to Rs. 1.5 lakh under 80C.

If you have not exhausted your 80C limit yet and you are a self-employed individual. Then you can invest up to 20% of your Gross Annual Income. This amount to the extent of 1.5 lakh is eligible for tax deduction u/s 80CCD (1) of IT Act, 1961. Additionally, you can invest up to ₹50,000 and avail tax deduction u/s 80CCD (1B)

Let us understand the Tax benefits in National Pension System for salaried individuals separately for 80c limit exhausted and not exhausted.

In case you have exhausted your 80C limit and you are a salaried individual, then you can invest up to Rs.50,000 and avail tax deductions u/s 80CCD (1B) of Income Tax Act, 1961. This tax benefit is over& above the tax benefits claimed by you for your investments of up to Rs. 1.5 lakh under 80C

If you have not exhausted your 80C limit yet and you are a salaried individual, then you can invest up to 10% of your Salary (Basic + DA). This amount to the extent of 1.5 lakh is eligible for tax deduction u/s 80CCD (1) of IT Act, 1961.Additionally, you can invest up to Rs.50,000 and avail tax deduction u/s 80CCD (1B)

There is Additional Tax Benefit for Salaried individuals under Corporate National Pension System. IN this scheme, employees get additional tax benefits on investment routed through their employer. Such investment up to 10% of Salary (Basic + Dearness Allowance) to the extent of Rs 7.5 lakh is deductible from taxable income u/s 80CCD (2) of Income Tax Act, 1961.

You may Enroll for NPS scheme for Worry Free Retirement through StockHolding and National Pension System related services.

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