Have some queries on tax saving through NPS, please help. My employer doesn’t contribute to NPS for me.
If I open NPS by myself, can I save tax? The tax saving will be only 10% of my basic salary + DA –> if basic is 10000 and DA is 10000 then benefit through NPS is up to investment of 2000/- only, Is this understanding correct? (i.e. for 10% tax, 200/- saving!)
Heard there are tier 1 and tier 2 accounts. Does the tier 2 account has tax benefits? Can the tier 2 amount be withdrawn without buying any annuity?
Thanks & Regards,
VS-When your employer not contributing to NPS, then why you are calculating the contribution based on your salary. Your salary will not matters. Yes, there are two types of NPS accounts. One is Tier 1, which is mandatory for all who want to invest in NPS. Tier 2 is optional and have lot of flexibility. But you will not get any tax benefits by investing in Tier 2.
Your contribution to this Tier 1 will consider into the Sec.80CCD(1) (which is also the part of Sec.80C).
In addition to this, from 1st April, 2015, if you can invest another Rs.50,000 under Sec.80CCD(1B).
Think twice of opening the NPS. Because as of now you may feel tax benefits. But the maturity proceeds or pension is taxable income for you. Also, liquidity is an issue with this product.