Finance Minister Arun Jaitley in Budget 2018 provided relief to non-salaried subscribers by proposing to exempt tax of 40% of the total amount payable to the NPS on closure of the subscriber’s account or when the latter opts out of the scheme.
Thus, tax benefit of non-salaried individuals would be at par with salaried individuals.
The National Pension Scheme is termed as contribution retirement savings scheme developed to enable the subscribers for making decisions regarding their future through systematic savings during their working life.
According to the existing provision of Clause (12A) of section 10 under Income Tax Act, an employee contributing to the NPS is allowed an exemption in respect of 40% of the total amount payable on closure of the subscriber’s account or when the investor opts out of the scheme.
This means that up to 60% of the maturity collection can be withdrawn as lump sum on maturity at the age of 60. However, in case the subscriber wants to opt out of NPS before the age of 60, he/she will only be able to collect 20% of the total payment.
Remaining 40% will be used to buy annuity from an insurance company. Now, this service will soon be available to non-salaried individuals.
So if you are a non-salaried person and plan to make investment in NPS, you need to remember few pointers.
According to a ClearTax report, “The NPS makes a lot of sense for anyone who wants to plan for their retirement from an early age. A regular pension after you retire can be very useful if you don’t have a regular source of income.”
One needs to remember there are many tax benefits under NPS.
Self-contribution to NPS is covered under 80CCD(1) which is a part of section 80C and also under section 80CCD(1B).
A person can claim under 80CCD (1) about 10% of salary which again should not exceed the overall limit of 80C which is Rs 1.5 lakhs.
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