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National Pension System (NPS) is a voluntary, defined contribution retirement savings scheme that comes under the Ministry of Finance, designed to enable the subscribers to make optimum decisions regarding their future through systematic savings during their working life.
NPS seeks to inculcate the habit of saving for retirement amongst the citizens. For salaried individuals who have claimed tax exemption of Rs. 1.5 lakh under Section 80C, NPS offers scope for additional tax savings. Both salaried and self-employed NPS account holders with an investment of up to Rs. 50,000 qualify for an additional tax exemption under Section 80CCD (1B) of the Income-Tax Act. However, this additional deduction under Section 80CCD (1B) applies only to Tier I NPS account holders.
Many individuals are unaware that after retirement, you are not permitted to withdraw the entire NPS contribution. A minimum of 40% of the corpus, which is used to pay you a monthly pension, must be left. Fortunately, you can remove the remaining 60% without increasing your tax obligation.
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