What are tax benefits available under IT Act, 1961 for Tier 1 Account?
I) On Contributions:
Employee’s own Contribution- Eligible for tax deduction under sec 80 CCD (1) of Income Tax Act up to 10% of salary (Basic + DA) within the overall ceiling of Rs. 1.50 Lacs under Sec. 80 C of the Income Tax Act.
From F.Y. 2015-16, subscriber will be allowed tax deduction in addition to the deduction allowed under Sec. 80CCD(1) for contribution in his NPS account subject to maximum of Rs. 50,000/- under sec. 80CCD ) .
Employer’s contribution: Up to 10% of Basic & DA (no upper monetary ceiling) under 80CCD(2). This rebate is over and above 80 C. (This tax benefit is only available for NPS subscribers).
II) Partial Withdrawal– Tax free
III) Lump sum Withdrawal– In case of superannuation, 40% of lump sum withdrawal is tax free.
IV) Annuity– Amount utilized for purchase of annuity is not taxable in the hands of the subscriber.