National Pension System: NPS Tier 1 contribution stopped despite due date extension for tax saving investments

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Updated: March 31, 2020 6:38:16 PM

Investors need to contribute to NPS a few days before the end of a financial year, as there is some time gap between paying the contribution amount and getting it credited to the fund account.

Coronavirus outbreak, Novel Coronavirus COVID-19, lockdown, Coronavirus relief measures, extension in cutoff date for tax-saving instruments, Finance Minister Nirmala Sitharaman, National Pension System, NPSIt’s not clear whether the cutoff date for NPS would be extended or not for tax saving purpose for FY 2019-20.

To avail additional tax benefits up to Rs 50,000 in a financial year u/s 80CCD(1B), which is over and above the tax benefits of Rs 1.5 lakh u/s 80C, Nitin Deb (name changed) has been making voluntary contribution of Rs 50,000 near the end of every financial year in the Tier 1 account of the National Pension System (NPS).

However, when he tried to make his contribution this time, a message popped up saying, “NPS module is now close for FY 2019-20 and same will be available on 1st April 2020 at 9:00 AM.”

The transaction was declined even though Finance Minister Nirmala Sitharaman had said that, “Due dates for issue of notice, intimation, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents and time limit for completion of proceedings by the authority and any compliance by the taxpayer including investment in saving instruments or investments for roll over benefit of capital gains under Income Tax Act, Wealth Tax Act, Prohibition of Benami Property Transaction Act, Black Money Act, STT law, CTT Law, Equalisation Levy law, Vivad Se Vishwas law where the time limit is expiring between 20th March 2020 to 29th June 2020 shall be extended to 30th June 2020.”

Although the Finance Minister’s Novel Coronavirus COVID-19 relief measures include investment in saving instruments, but in absence of sections, lots of confusion have been created among taxpayers about the investment instruments that would enjoy the benefits of date extension.

Coronavirus outbreak, Novel Coronavirus COVID-19, lockdown, Coronavirus relief measures, extension in cutoff date for tax-saving instruments, Finance Minister Nirmala Sitharaman, National Pension System, NPS

While a taxpayer may normally invest in a tax-saving instrument till March 31 of a Financial Year (FY) to get tax benefits for the same FY, one needs to invest in NPS a few days before the end of a FY, as there is some time gap between paying the contribution amount and getting it credited to the fund account, which arises due to the structure of the National Pension System.

“Typically in a normal year, we accept NPS contribution till about March 26. There is backend work at the NPS end, which takes 2-3 working days to process it,” said a spokesperson of ICICI Securities, adding, “This year, we have extended it to March 30.”

“There is no extension (in cutoff date so far) for this (NPS),” said Ankit Agarwal, MD Alankit Ltd.

As his effort to invest in NPS through NJ India Invest Pvt Ltd, India’s largest mutual fund distribution company, failed, Deb is now confused if he would be able to get the tax benefit for FY 2019-20 by investing in NPS on or after April 1, 2020, or would it be considered for the next financial year only.

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