Tax benefits for NPS


Is choosing NPS a good option? What are the tax benefits for NPS that I can avail ?



What is NPS?

Launched by the Government in 2004, and opened to the public in 2009, NPS is a voluntary retirement scheme. By investing in it, you can create a retirement corpus and also get a monthly pension for life after retirement.

It is regulated by Pension Fund Regulatory Development Authority or PFRDA, and any Indian national between the age of 18 and 65 can join it. Since it’s a retirement scheme, an investor can’t redeem his money before the age of 60. However, partial withdrawal is allowed in specific needs like children’s education.

  • Tax Benefits under Section 80C

NPS is one of the listed investment options in which you can invest and save tax under Section 80C. The deduction limit for this section is Rs. 1.5 lakhs, and you can invest the entire amount in NPS, if you wish and claim the deduction.

  • Tax Benefits under Section 80CCD (1B)

This is an additional tax benefit given only to NPS investors. Under this section, you can claim tax deductions for your investments up to Rs 50,0000. This is over and above the deduction that you can claim under Section 80C.

So, you can claim tax deduction up to Rs 2 lakh simply by investing in NPS – Rs 1.5 lakh under Section 80C and another Rs 50,000 under Section 80CCD (1B).

  • Tax Benefits under Section 80CCD (2)

This benefit can be availed on the contributions made by the employer, hence, this one is meant for the salaried individual and not self-employed. Government employees can claim 14 percent of their salary tax deduction under this section. Meanwhile, for private sector employees it is capped at 10 percent of their salary.


Choosing NPS is always a good option @Sandeep_G if retirement benefits are considered.

The three exemptions you get are – no tax on the amount invested, no tax on the returns generated and no tax on the maturity amount, with the features like flexibility of investing and in-built risk reduction strategy, and several tax benefits, NPS is an excellent retirement saving tool.

A good article to read: 6 Reasons For Investing In NPS.



Income from the annuity is taxable.
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Shrivatsa A V