How Extra benefit of Rs 50,000 on NPS is beneficial...........

While planning your money think long term, says the finance minister. In the union budget announced today, finance minister Arun Jaitley has chosen to hike present limit of Rs 1 lakh under section 80CCD of Income Tax Act to Rs 1.5 lakh per year.
 The gift offers dual benefits to taxpayers – first they can save income tax and second they can ensure regular cash flow in the golden years of the life in the form of monthly pension.But how easy or difficult it is?


  • Section 80CCD allows salaried individuals to enjoy tax shelter in addition to Rs 1.5 lakh investment limit introduced under section 80C, if their employers contribute to the new pension scheme. 
  • The contribution by the employer should be limited to 10% of the salary paid to the employee. This means that you have to cajole your employer to contribute more to NPS. 
  • Salaried individuals can themselves invest in NPS and claim tax deduction under section 80C. However self-employed individuals do benefit in this as long as the overall investmet limit of Rs 1.5 lakh is adhered to.
  •  In case of self-employed individuals they can contribute to NPS under section 80CCD provided the money so invested in NPS does not exceed more than 10% of their total gross income, under various heads before claiming any deductions.

 Last year in his maiden budget, finance minister opted to hike the investment limit under section 80C by Rs 50000 to Rs 1.5 lakh. This was positively received by individual tax payers. This year it was widely expected that the finance minister will continue with his stance and further enhance it. Reserve Bank of India Governor, Raghuram Rajan too has called for an increase in tax saving limit. The expectation materialized. On the backdrop of falling inflation, rising stock markets and green shoots in job market, finance minister offered one more reason to rejoice to individual tax payers.

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