“Save for a rainy day” is an idiom that comes to our mind quiet often in these testing times. We hear that a lot of people have pay cuts and many of the small businesses are struggling to keep themselves afloat. It is definitely not a cake walk for anyone now. But the ones who had “saved for a rainy day” would find it a little more manageable than the ones who did not.
A retirement plan is a MUST to enable us to sail through it comfortably. And it is good to plan for it as early as possible. NPS is one such retirement plan. This article gives a brief intro to the scheme and addresses the common question that arises in a tax payer’s mind – “Why consider NPS as against other schemes?”
A brief intro to National Pension Scheme (NPS):
Pension scheme open to all Indian citizens between 18-60 years of age. Can NRI’s invest? Yes. OCIs & PIOs are not eligible.
It is meant to provide regular income to subscribers on the amount of contribution.
Tax benefits on NPS contribution are available under sec 80CCD(1), 80CCD(2) and 80CCD(1B) of the income tax Act.
As per Income Tax rules, NPS corpus is exempt upto 60% of the amount due at the time of closure or opting out of the scheme.
Annuity or the Pension is to be purchased by the NPS subscriber by using the balance 40% of the corpus.
Why NPS? :
In addition the traditional tax saving options under Sec 80C (upto Rs. 1, 50,000), Sec 80CCD(1B) is specifically allotted ONLY to contribution to NPS. This directly reduces the taxable income by Rs. 50,000 (max).
Rate of return from NPS is higher when compared to other traditional tax saving retirement products like PPF & EPF.
One has an option to change the NPS fund manager once in a financial year, thus giving the flexibility to opt for a better performing fund manager.
How can we help you?
Various clauses from the Income Tax Act may be simplified in online contents. But most of the time, it requires professional help in identifying suitable route for specific instances. Similar to nurturing and taking care of personal health, it is important to also keep a tab on one’s financial health. We at Chockalingam Unnamalai & Associates, can help you understand the pros and cons of various choices you make in the context of personal taxation. You can bank on us for a stress free tax filing and related compliances.
Call us at +91 73050 56628 or drop a mail to frontoffice@onesourcevault.com
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Effective compliance is a key pillar for growing your finances and career/business. Tax compliance in particular could be cumbersome and at times very stressful. We help you to navigate through the maze of changes to tax laws with ease.
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