The salaried class often bear the brunt of taxes. With strict limits on the claims once can make under Section 80C, the one last resort for claiming a further tax deduction is NPS – the National Pension Scheme.
About the National Pension Scheme (NPS)
National Pension Scheme (NPS) India is a voluntary and long-term investment plan for retirement under the purview of the Pension Fund Regulatory and Development Authority (PFRDA) and Central Government.
This scheme has been in effect for over a decade, and so far has delivered 8% to 10% annualised returns. One can choose/ change your fund manager based on the performance of the fund.
A word of caution – a portion of the NPS goes to equities . While this appears like a risk, it is only due to this reason that the returns are much higher than other traditional tax-saving investments like PPF.
Additional deduction in NPS
To encourage investment in NPS, Section 80CCD(1B) of the Income-tax Act allows an additional deduction of Rs 50,000 over and above the Rs 1.5 lakh available under Section 80CCE.
Thus, where the individual taxpayer has exhausted the limit of Rs 1.5 lakh under Section 80CCE by making other investments eligible for deduction under the said section (apart from NPS), contribution made by him/her (either by himself or through deduction from salary) towards NPS can be utilised to claim additional deduction of Rs 50,000 under Section 80CCD(1B).
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