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National Pension Scheme (NPS) became a famous investment module amongst the high tax bracket income earning individuals because of the additional tax benefit that is included in these investments. NPS, which is a voluntary, defined contribution retirement savings scheme, enables the subscriber to accumulate savings during his or her working life. NPS offers two types of accounts – Tier I and Tier II. The Tier 1 account is non-withdrawable till the person reaches the age of 60. Partial withdrawal before that is allowed in specific cases. (Refer our Article on NPS withdrawal) On the other hand, the Tier II National Pension Scheme account is just like a savings account and subscribers are free to withdraw the money as and whenever they require. We have written a detailed article on the features of NPS. Income Tax Benefits You Need To Know On Tier 1 Accounts
|Section||Deduction allowed||Amount||Who can claim|
|80CCD(1)||Employee contribution upto 10% of the basic + DA||Upto INR 1.5 lakhs including other 80C deductions||Employees. Self-employed can claim 20% of their annual income.|
|80CCD(2)||Employers contribution upto 10% of basic + DA||Employers Contribution (No Cap)||Only salaried individuals and not self-employed.|
|80CCD (1B)||Additional benefit of INR 50,000 over and above the benefit in 80CCD (1)||Upto INR 50,000||Employee, self-employed or general citizen.|
- when you withdraw before 60 years.
- When subscriber turns 60