With lofty returns and tax breaks, New Pension System ropes in 400 firms
More then the annual return, NPS is becoming a preferred choice for the tax incentives. A subscriber’s contribution to NPS tier-I up to 10% of the salary (basic plus dearness allowance) is tax exempt under Sec 80CCD (i) with a ceiling of R1 lakh. Besides, the employers’ contribution of up to 10% of the salary is also tax exempt in the hands of the employee under Section 80 CCD (ii) of Income Tax Act. “By contributing to the NPS, the employer can provide an additional tax benefit to the employee by simply reorganising the salary structure without incurring any additional cost to the company (CTC),” an official said.
Even in terms of fund management charges, NPS comes cheaper than EPFO. The investment cost of NPS is capped at 0.25% for the private sector. In contrast, the EPFO deducts 1.1% of the contribution as administrative charges and another 0.18% for inspection charges.
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