Understanding NPS (National Pension System)
The National Pension System (NPS) is a government-sponsored retirement savings scheme in India, designed to provide individuals with a sustainable income post-retirement. Established in 2004, NPS offers a range of investment options and tax benefits, making it an attractive choice for retirement planning.
Tax Benefits of NPS Contributions
Contributions made towards NPS come with a host of tax benefits, making it a favored investment avenue for individuals seeking to optimize their tax liabilities. Here’s a comprehensive breakdown of the tax benefits associated with NPS:
Tax Exemption on Contributions
Contributions made towards NPS are eligible for tax deductions under Section 80CCD(1) of the Income Tax Act, 1961. As per this section, an individual can claim a deduction of up to 10% of their gross income (for salaried individuals) or 20% of gross total income (for self-employed individuals) towards NPS contributions, subject to a maximum of ₹1.5 lakh per financial year.
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