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Maximize Your Tax Savings with NPS: A Complete Guide

February 22, 2024

As the end of the financial year approaches and a new one begins, individuals are gearing up to start planning for their goals and aspirations for the upcoming year. For many, planning taxes is a crucial part of this process, especially for those subject to income taxes.

But the question is: Can investing in the National Pension Scheme (NPS) lead to tax savings? The answer is YES! Let’s explore how we can leverage NPS to achieve tax benefits.

What is the National Pension System (NPS)?

NPS is a voluntary investment and retirement savings scheme for salaried people as well as for business owners. It was introduced by the Government of India in 2004, and it is regulated by the PFRDA (Pension Fund Registrations and Development Authority), a government entity that monitors NPS. NPS is a market-linked pension scheme that is managed by fund managers.

There are various aspects related to NPS tax savings, which are explained below.

Tax-saving Under NPS

As you know, there are two types of NPS accounts: Tier 1 and Tier 2. Contributions made to an NPS Tier 1 account are entitled to receive NPS-tax savings deductions, whereas a Tier 2 account does not offer any tax deductions or benefits. To know more about Tier 1 and Tier 2 accounts, read here.

Tax-Saving Benefits in NPS

  • Section 80C: You can receive NPS tax benefits under 80C as the deduction limit is ₹1.5 lakhs. If you want tax benefits under this section, you can invest the entire amount in NPS and claim the deduction.
  • Section 80CCD (1B): This is an additional tax benefit for NPS subscribers. An investor can claim additional tax deductions for his or her investments up to ₹50,000 under this section.
  • Section 80CCD (2): By opting for a corporate NPS contribution, you can contribute up to 10% of your basic pay to NPS which is tax deductible with a limit of ₹5.5 lakh..

However, it is to be noted that, up to 60% of your corpus is exempt from tax, and subsequent income from annuities is taxed under Section 80CCD (3) of the Income Tax Act.

Conclusion

In summary, there are several sections available for tax savings through NPS investments, but proper planning is essential. As this financial year will be ending soon, it will be beneficial for you to gain knowledge on this at the right time to help you save taxes while investing in NPS.

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NPS Calculator is Happy to Help You Plan for Your Retirement

December 26, 2023

When you are searching for missing things in your almirah or unopened drawer, you may have found something that you are not looking for but it may have put a smile on your face. Like an old mobile phone with a keypad or a calculator. And if it is in a working condition then? With new-age technology, we tend to forget a few things but one thing is the same, whether it is in an old phone, a new phone, or on the internet – The Calculator.

People who invest or save, calculate their savings and investment amount as well to get the estimated returns. If you are investing in the National Pension System (NPS) for your golden years you can take the help of the NPS calculator.

So, what is the NPS Calculator, and how it can help you, this is what we are going to find out in this blog. 

What is the National Pension System calculator?

An NPS calculator is a tool that allows you to calculate the amount of pension you can expect to receive through the National Pension System (NPS) once you retire. It helps you plan for your retirement by giving you an idea of the benefits you can expect to get under the NPS.

The National Pension System calculator can help to get the estimated pension amount and your retirement corpus. It is an easy online tool that can help you to decide the investment amount for your retirement. Looking for a step-by-step guide for the National Pension System Calculator? Click here.

Now, you understand the NPS calculator. Let’s have a look at how it can help you in your investment and decision-making.

How can the NPS calculator help you?

  • Estimate the retirement benefits: You can estimate your potential retirement benefits based on your current age, your contribution amount, your expected return, and other factors.
  • Assess your retirement needs: With the NPS calculator, you can determine if your projected retirement benefits will be enough to cover your retirement needs and help you plan for a comfortable retirement.
  • Compare your future with the NPS calculator: You can use the NPS calculator to compare your future with different scenarios by changing variables. It will help you to see how these changes will affect your retirement benefits and you can adjust them accordingly.

To calculate your retirement corpus, click here.

Conclusion

People plan for retirement to know the pension amount, annuity corpus, investment horizon, expected rate of returns, etc. NPS calculator can be a useful tool if you are looking to get the answers about your retirement. If you’re unsure of how to plan for retirement, the National Pension System calculator can help you make an informed decision.