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Showing posts with label 80 CCD (1). Show all posts
Showing posts with label 80 CCD (1). Show all posts

Tier I and II Accounts of NPS

Tier I and II Accounts of NPS 

National Pension System
The National Pension System (NPS) investments can be done in two types of accounts i.e. Tier I and Tier II accounts. Both types of accounts can be maintained in a single allotted Permanent Retirement Account Number (PRAN). What is difference between Tier I and Tier II account? Where to invest and why? What are the advantages and disadvantages of investing in Tier I and II accounts?

Tier I Account:

The contribution in Tier I account cannot be withdrawn at any time, however it can be partial withdrawal for specific purposes. The investment or contribution in Tier I offers the following tax benefits:

Income Tax Benefits on Tier I contribution of NPS:

Under section 80 CCD (1):

Every citizen is provided deduction for making contribution to his or her pension account. Since National Pension System is a pension account; an employee is provided deduction up to 10% of his salary for contribution in Tier I account. In case of self-employed person, such contribution is allowed up to 20% of the gross total income. However, the maximum deduction under section 80CCD (1) cannot be more than Rs. 1.5 lac.

Under Section 80 CCD (2):

In case, the employer contributes in employee’s NPS account then such contribution is deductible from taxable income of the employee. The contribution can be made up to 10% of the salary i.e. Basic Pay and Dearness Allowance. This deduction is additional to Rs. 1.5 lac of 80 CCD (1).
In case of government organizations making such contribution, the amount is not included in taxable income under the head salary and the government directly deposit into the PRAN number of employee. There is no maximum limit of such contribution.
In case of private organizations making such contribution, the amount is sometimes provided to the employees and counted in their salary; in such cases, deduction is shown under section 80 CCD (2) from the salaries in Form 16.
The organizations are also allowed to claim such contribution under section 80 CCD (2) in employee’s NPS account as business expense in their profit and loss account. There is no monetary limit for such contribution.

Under Section 80 CCD (1B):

Apart from 80 CCD (1), 80 CCD (2); deduction under section 80 CCD (1B) is also allowed for additional amount of Rs. 50000 contributed by the employee in his or her Tier I account. However, in this section, the contributions of Atal Pension Yojana (APY) can also be counted for the purposes of deduction.
Section 80 CCE states that the deduction under sections 80 C, 80 CCC and 80 CCD (1) cannot be more than Rs. 1.5 Lacs. But the deductions under section 80 CCD (2) and 80 CCD(1B) are in addition to this limit of Rs. 1.5 Lac.

Tax Benefits during withdrawal of amount from Tier I of NPS:

As per NPS withdrawal rules notified in 2018, after meeting the following conditions, a subscriber can withdraw up to 25% accumulated corpus of Tier I account of NPS. Such withdrawal is known as partial withdrawal and there is not tax on such withdrawal, if:
(i)        Such withdrawal is after completion of 3 years in NPS
(ii)  Such withdrawal can be maximum up to thrice during the tenure of subscription
(iii)  Specified form along with necessary documents is submitted for the withdrawal claim i.e. for the following purposes:
a)   For higher education of self or children
b)  For setting up or acquiring a new business
c)   For the marriage of children
d)  For constructing or purchasing residential house or flat (only if no residential house is earlier owned)
e)   For treatment of subscriber or spouse or dependent parents suffering from specified illness including Cancer, Kidney Failure, Multiple Sclerosis, Heart Valve Surgery, Coma, Paralysis, serious accident, and other treatments specified in NPS Withdrawal Rules 2018.
In case, the amount of accumulated corpus is withdrawn for purchase of Annuity, then it will not be taxable.
Further, at the time of subscriber attaining the age of 60, if he withdraws amount in lump sum; then 40% of the total corpus amount will be exempt from tax. Remaining 60% which is taxable, can be used to purchase the annuity and in such case, no income tax will be payable at final withdrawal of the NPS amount.
However, if a subscriber desires, he or she can continue the NPS account up to the age of 70.

Tier II Account:

The contribution in Tier II account has more flexibility in terms of withdrawal and it can be withdrawn at any time. However, no income tax deduction is allowed in its contribution. It is considered as savings of a subscriber and the amount can be transferred to Tier I account whenever required. In Tier II contribution, the subscriber can select different investment pattern i.e. choice than the Tier I account. For example, if in Tier I, he opted Auto Choice then here he may opt Active Choice. In Tier II, there is no minimum contribution required to be made and there is minor maintenance cost or exit load levied on the subscriber.

 Drawback of investing in NPS:

The major drawback of investing in NPS account is that there are no assured returns from the NPS account neither in case of Tier I account nor in case of Tier II account. The benefit of Tier II is that the amount can be withdrawn at any time but the drawback of this account is, no tax benefit is available on this account.
But instead of its drawbacks, the NPS has become a preferable investment by the citizens due to its tax benefits:

A.  The Subscriber' contribution under NPS (Tier I) is eligible and qualify for deduction u/s Sec. 80 CCD (1) & Sec. 80CCD (1B) of the Income-Tax Act, 1961. However; the deduction u/s 80CCD (1) is subject to the limit and conditions specified in Sec. 80CCD (1) read with Sec. 80CCE. 
And
The deduction under Sec. 80CCD (1B) is an additional deduction for amount paid in NPS up to Rs. 50000. However, the same amount cannot be claimed both under sub-section (1) and sub-section (1B) of section 80CCD.
B. The contribution made by the employer up to 10% of the salary qualifies for deduction u/s Sec. 80 CCD (2) of the Act. 

рд╕рд░рдХाрд░ी рдХрд░्рдордЪाрд░िрдпों рдХे рд▓िрдП рдмрдб़ी рдЦुрд╢рдЦрдмрд░ी! NPS рдХो рдЫोрдб़рдХрд░ рдкुрд░ाрдиी Pension рд╕्рдХीрдо рдХा рд▓े рд╕рдХрддे рд╣ैं рдлाрдпрджा

NPS and Old Pension System: рдХेंрдж्рд░ीрдп рдХрд░्рдордЪाрд░िрдпों (Central Government employees) рдХी рдкेंрд╢рди рдХो рд▓ेрдХрд░ рдПрдХ рдмрдб़ा рдРрд▓ाрди рдХिрдпा рдЧрдпा рд╣ै. рд╕рд░рдХाрд░ी рдХрд░्рдордЪाрд░ी рдЕрдм National Pension System (NPS) рдХो рдЫोрдб़рдХрд░ рдкुрд░ाрдиी рдкेंрд╢рди рд╕्‍рдХीрдо (OPS) рдХा рдлाрдпрджा 31 рдордИ 2021 рддрдХ рд▓े рд╕рдХрддे рд╣ैं.
рдбिрдкाрд░्рдЯрдоेंрдЯ рдСрдл рдкेंрд╢рди рдПंрдб рдкेंрд╢рдирд░्рд╕ рд╡ेрд▓рдлेрдпрд░ (DoPPW) рдиे рдпे рдЬाрдирдХाрд░ी рдПрдХ рдиोрдЯिрдлिрдХेрд╢рди рдХे рдЬрд░िрдП рджी рд╣ै. 

Old Pension Scheme рдХे рд▓िрдП 5 рдордИ рддрдХ рдЖрд╡ेрджрди 

рд╕рд░рдХाрд░ рдиे рдХрд╣ा рд╣ै рдХि рдЬो рднी рдХрд░्рдордЪाрд░ी рдЗрд╕рдХा рдлाрдпрджा рд▓ेрдиा рдЪाрд╣рддे рд╣ैं 5 рдордИ рддрдХ рдЖрд╡ेрджрди рдХрд░ рд╕рдХрддे рд╣ैं. рдЬो рдХрд░्рдордЪाрд░ी рдЖрд╡ेрджрди рдирд╣ीं рдХрд░ेंрдЧे рдЙрди्рд╣ें National Pension System рдХा рдлाрдпрджा рдоिрд▓рддा рд░рд╣ेрдЧा. рдЬो рднी рдХрд░्рдордЪाрд░ी 1 рдЬрдирд╡рд░ी 2004 рд╕े 28 рдЕрдХ्рдЯूрдмрд░ 2009 рдХे рдмीрдЪ рдоें рдиिрдпुрдХ्рдд рдХिрдП рдЧрдП рд╣ैं рдЙрдирдХो CCS Pension рдХे рддрд╣рдд рд╣ी рдкेंрд╢рди рдХा рд▓ाрдн рдоिрд▓ेрдЧा.

рдкुрд░ाрдиी рдкेंрд╢рди рдпोрдЬрдиा рдЬ्рдпाрджा рдлाрдпрджेрдоंрдж!

рдЗрд╕ рдлैрд╕рд▓े рдкрд░ рдПрдХ्рд╕рдкрд░्рдЯ्рд╕ рдХा рдХрд╣рдиा рд╣ै рдХि рдкुрд░ाрдиी рдкेंрд╢рди рд╕्рдХीрдо NPS рд╕े рдЬ्рдпाрджा рдлाрдпрджेрдоंрдж рд╣ै, рдХ्рдпोंрдХि рдкुрд░ाрдиी рд╕्рдХीрдо рдоें рд░िрдЯाрдпрд░рдоेंрдЯ рдХे рдмाрдж рдкेंрд╢рдирд░्рд╕ рдХे рд╕ाрде рд╣ी рдкрд░िрд╡ाрд░ рд╡ाрд▓ों рдХो рднी рд╕िрдХ्рдпोрд░िрдЯी рдоिрд▓рддी рд╣ै. 

рдХिрди рдХрд░्рдордЪाрд░िрдпों рдХो рдоिрд▓ेрдЧा рдпोрдЬрдиा рдХा рдлाрдпрджा

рдкुрд░ाрдиी рдкेंрд╢рди рдпोрдЬрдиा рдХा рдлाрдпрджा рдЙрди्рд╣ीं рдХेंрдж्рд░ीрдп рдХрд░्рдордЪाрд░िрдпों рдХो рдоिрд▓ेрдЧा, рдЬो рд░ेрд▓рд╡े рдкेंрд╢рди рд░ूрд▓्‍рд╕ рдпा CCS (рдкेंрд╢рди) рд░ूрд▓्‍рд╕, 1972 рдХे рддрд╣рдд рд░ाрдЬ्рдп рд╕рд░рдХाрд░ рдХे рдХिрд╕ी рд╡िрднाрдЧ рдпा рд╕्рд╡ाрдпрдд्рдд рд╕ंрд╕्‍рдеाрдУं рдоें 1 рдЬрдирд╡рд░ी, 2004 рд╕े рдкрд╣рд▓े рдиिрдпुрдХ्‍рдд рдХिрдП рдЧрдП рдеे. рдЗрд╕рдХे рдмाрдж рдЕрдЧрд░ рдЙрди्рд╣ोंрдиे рд░ाрдЬ्рдп рд╕рд░рдХाрд░ рдХे рдкेंрд╢рдирднोрдЧी рд╡िрднाрдЧ рдХी рдиौрдХрд░ी рд╕े рдЗрд╕्рддीрдлा рджेрдХрд░ рдХेंрдж्рд░ рд╕рд░рдХाрд░ рдХे рдкेंрд╢рдирднोрдЧी рд╡िрднाрдЧ рдпा рдХेंрдж्рд░ीрдп рд╕्‍рд╡ाрдпрдд्‍рдд рд╕ंрд╕्‍рдеा рдоें рдиिрдпुрдХ्рддि рд╣ाрд╕िрд▓ рдХी. 

рдХ्рдпा рд╣ै NPS 

рдиेрд╢рдирд▓ рдкेंрд╢рди рд╕िрд╕्рдЯрдо рдоें 18 рд╕े 60 рд╕ाрд▓ рддрдХ рдХी рдЙрдо्рд░ рдХे рд▓ोрдЧ рдЗрд╕рдоें рдиिрд╡ेрд╢ рдХрд░ рд╕рдХрддे рд╣ैं. рд╕рднी рд╕рд░рдХाрд░ी рдФрд░ рдиिрдЬी рдмैंрдХों рдоें рдЕрдХाрдЙंрдЯ рдЦोрд▓ рд╕рдХрддे рд╣ैं. рдХрд░्рдордЪाрд░िрдпों рдХो рд╕ेрдХ्рд╢рди 80CCD рдХा рд╕рдм рд╕ेрдХ्рд╢рди 80CCD (1) рдХे рддрд╣рдд рдкेंрд╢рди рд╕्рдХीрдо рдоें рдЬрдоा рдкрд░ рдЯैрдХ्рд╕ рдоें рдЫूрдЯ рдоिрд▓рддी рд╣ै.
рд╕ैрд▓рд░ीрдб рдХрд░्рдордЪाрд░ी рдЕрдкрдиी рд╕ैрд▓рд░ी рдХा 10 рдкрд░рд╕ेंрдЯ рддрдХ рдФрд░ рдиॉрди рд╕ैрд▓рд░ीрдб рдХрд░्рдордЪाрд░ी рдЕрдкрдиी рдХुрд▓ рдЗрдирдХрдо рдХा 20 рдкрд░рд╕ेंрдЯ рддрдХ рдкेंрд╢рди рдЕрдХाрдЙंрдЯ рдоें рдЬрдоा рдХрд░ рд╕рдХрддे рд╣ैं. рдЗрд╕ рдкрд░ рдЗрди्рд╣ें 1.5 рд▓ाрдЦ рд░ुрдкрдпे рддрдХ рдЯैрдХ्рд╕ рдЫूрдЯ рдоिрд▓рддी рд╣ै. 


*Copyright © 2018 Dr. Lalit Kumar. All rights reserved. 

You might also be interested in learning from the following:

1. How Money Grows in NPS   

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