6 important tax benefits to government employees under New Pension Scheme

New Pension Scheme Tax benefit is available on the contribution made by the employee in Tier-I account.

But this tax benefit can be within the overall limit of tax exemption available under Section 80C of Income Tax only within Rs 1.50 lakh.

Contribution made by the government to the NPS account of its employees comes under tax benefits and is completely tax free.

The maximum tax exemption limit that can be claimed is Rs.50 thousand under 80CCD(1B) in Tier-I in addition to the maximum tax exemption limit of Rs.1.5 lakh.

So, the employee can get NPS tax benefit up to Rs 2 lakh in aggregate under Section 80CCD(1) and Section 80CCD(1B).

Now tax exemption can be claimed on money invested in Tier-II also. This tax exemption will be in addition to the tax exemption available under Tier-I.

If a government employee makes a partial withdrawal of up to 25% of the contribution made to the NPS, then there is no tax on it.

There is no tax on withdrawal of 60% of the amount from Tier-I account at the time of retirement. The remaining 40% amount is invested in Annuities.

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