TAMILAGAASIRIYAR QUICK LINKS

CLICK HERE TO VIEW..






Monday, February 20, 2017

NATIONAL PENSION SCHEME – Additional Deduction of Rs. 50,000/-. Whether further clarification is required?

NATIONAL PENSION SCHEME – Additional Deduction of Rs. 50,000/-. Whether further clarification is required?

Navneet Singal
A retirement plan is an arrangement to provide people with an income during retirement when they are no longer earning a steady income from employment. Retirement plan ensures that people live with pride and without compromising on their standard of living during advancing years. Pension scheme gives an opportunity to invest and accumulate savings and get lump sum amount as regular income through annuity plan on retirement.


The National Pension System (NPS) was launched by Government of India on 1st January, 2004 with the objective of providing retirement income to all the citizens. NPS aims to institute pension reforms and to inculcate the habit of saving for retirement amongst the citizens.

Initially, NPS was introduced for the new government recruits (except armed forces). With effect from 1st May, 2009, NPS has been provided for all citizens of the country including the unorganized sector workers on voluntary basis.

Currently, Investment in NPS can be made by the following sectors:

Central/State Govt. Employees
Corporates
All Citizen Model (Individual)
Unorganized Sector Workers
Every subscriber to NPS will be allotted a unique Permanent Retirement Account Number (PRAN). This unique account number will remain the same for the rest of subscriber’s life. This unique PRAN can be used from any location in India. It will provide excess to investment in two type of accounts:

Tier I Account: This is a non-withdrawable account meant for savings for retirement. (Tax benefit is available)
Tier II Account: This is simply a voluntary savings facility. The subscriber is free to withdraw savings from this account whenever subscriber wishes. No tax benefit is available on this account.
NPS is an EET Scheme which means exempt at the time of investment, exempt at the time of appreciation and Taxable at the time of withdrawal.

Tax benefit provided under Income Tax Act, 1961 can be described as follows:

Tax Benefits At the time of Contribution in Pension Scheme

Tax benefits to employer:

Contributions made by the employer (upto 10% of Basic + DA) is allowed as a business expense under Section 36 (1) (iv) (a) of Income Tax Act 1961

Tax benefit to employee:

Employer’s contribution – Eligible for tax deduction upto 10% of Salary (Basic + DA) contributed by employer under sec 80 CCD (2)

It is to keep in mind that this contribution is not included in overall limit of Rs. 1.5 lakhs as mentioned u/s 80CCE. It means that if any employee has basis salary of Rs. 30,00,000/- and his employer contribution Rs. 3.00 lakhs, he can get a deduction of Rs. 3.00 lacs u/s 80CCD (2). It can provide lot of tax benefit to employees under higher salary brackets.

Employee’s contribution – Eligible for tax deduction upto 10% of Salary (Basic + DA) under sec 80 CCD (1) within the overall ceiling of Rs. 1.5 Lac under Sec. 80 CCE.

Further w.e.f. FY 2015-16, in addition to the deduction u/s 80 CCD (1), deduction of Rs. 50,000 has been on contribution in NPS. (U/s 80CCD(1B))

It is to further clarify that if an corporate has not opted for the corporate plan and employees are making investment under the all citizen model i.e. on their individual basis, even in that case investment made by them can be claimed by the employee and the employer is liable to provide deduction u/s 80CCD (1) and u/s 80CCD (1B) to the employee under form 16.

In other words, it can be mentioned that an employee can claim overall deduction of Rs. 2,00,000/- (i.e. Rs. 1,50,000/- u/s 80 C/80CCC/80CCD(1) and Rs. 50,000/- u/s 80 80CCD(1B))
[2/20, 8:15 PM] Siva: However, if we go through the provisions related to Pension Plan i.e. 80CCD literally, some ambiguity can’t be denied. New inserted provision 80CCD (1B) reads as follows :

“(1B) An assesse referred to in sub-section (1), shall be allowed a deduction in computation of his total income, [in addition to the deduction allowed under sub-section (1)], of the whole of the amount paid or deposited in the previous year in his account under a pension scheme notified or as may be notified by the Central Government, which shall not exceed fifty thousand rupees:

It means that additional deduction of Rs. 50,000 is in addition to the deduction allowed under sub-section (1). It can have two meanings

Additional deduction is after completion of 10% limit as provided u/sub section of 80CCD.
Addition deduction is over & above the ceiling limit of Rs. 1,50,000/- as defined u/s 80CCE.
It I interpret as per point no. (1), to get additional deduction of Rs.50,000/-, I have to invest in NPS more than 10% of my basic salary wherever as per point no. 2, any investment in NPS can be considered as additional depreciation.

However, in the Budget Speech given by FM in the Lok Sabha, it is clarified by the example cited in the speech that the assessee can claim additional deduction even though he is within the limit of 10% of basic salary/GTI, still it is better to clarify the situation by issuing a circular in this regard.

Taxation at time of withdrawal of money from pension fund

Where any amount standing to the credit of the subscriber in respect of which a deduction has been allowed together with the amount accrued thereon, if any, is received by him or his nominee, in whole or in part, in any previous year,—

(a) on account of closure or his opting out of the pension scheme; or

(b) as pension received from the annuity plan purchased or taken on such closure or opting out,

the whole of the amount referred to in clause (a) or clause (b) shall be deemed to be the income of the assessee or his nominee, as the case may be, in the previous year in which such amount is received, and shall accordingly be charged to tax as income of that previous year.

Further, the subscriber shall be deemed not to have received any amount in the previous year if such amount is used for purchasing an annuity plan in the same previous year.


No comments:

Post a Comment

SSLC STUDY MATERIAL

PLUS TWO STUDY MATERIAL

SSLC TIME TABLE 2013-2014

PLUS TWO TIME TABLE 2013-2014

DSE NEW STUDY MATERIAL – CHENNAI

DSE- NEW STUDY MATERIAL –CHENNAI

SSLC HALF YEARLY KEY ANSWERS 13-14

+2 HALF YEARLY KEY ANSWERS 13-14

SSLC OLD DSE MATERIAL

PLUS TWO OLD DSE MATERIAL

SSLC EXAM TIPS

PLUS TWO EXAM TIPS

SSLC NEW STUDY MATERIAL

+2 NEW STUDY MATERIAL

SSLC OLD STUDY MATERIAL

+2 OLD STUDY MATERIAL

SSLC QUESTION PAPERS

PLUS TWO QUESTION PAPERS

SYLLABUS(UP DATED SOON)

SYLLABUS

உங்களிடம் உள்ள SSLC&+2 மாணவர்கள் பயனடையும் வகையில் முக்கிய வினா மற்றும் விடை குறிப்புகள் அனுப்ப மறவாதீர் EMAIL ID- tamilagaasiriyar@gmail.com

TAMILAGAASIRIYAR ANDROID APP

TAMILAGA ASIRIYAR Headline Animator

JOIN - TEAM TAMILAGAASIRIYAR

நமது வலைத்தளத்தினை மொபைலில் கண்டுகளியுங்கள்.

நண்பர்களே தோழர்களே இப்பொழுது.நமது வலைதளம்! www.tamilagaasiriyar.com உங்களது மொபைல்போனில் காணலாம் உங்களுக்குகாக,நீங்கள் எளிதில் காணும் படி வடிவமைக்கப்பட்டுள்ளது.andirod phone user can view this website in ibrowser.nokia symbain phone user மற்றும் other phone users can download click this link opera உங்கள் மொபைல் போன்காண சரியான சாப்ட்வேர்னை தேர்ந்தெடுத்து install செய்யவும்.மேலும் உதவிக்கு இங்கு கிளிக் செய்யவும்


join face book :
https://encrypted-tbn3.gstatic.com/images?q=tbn:ANd9GcTcAYOyioELqDvJ8QjJ176Yaje7MihRaAlj3dF56_XBBbGU6NmGiw



thank you!