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NPS A tax-friendly tool Individual contributions to NPS are eligible for tax deduction up to a maximum limit of Rs 1 lakh under Section 80 C. However, very few investors as well as employers are aware that NPS gives you the leeway to save taxes over and above the standard deduction of Section 80 C. This additional tax deduction can be availed under Section 80CCD (2). Under this section, up to 10 per cent of an employee's basic salary put in the NPS is tax deductible. Refer Table Tax Saving Tip: Add NPS to your CTC Salary Without With NPS Component NPS Basic Salary NPS Contribution (10% of Basic) Gross Salary Taxable Income PF (12% Basic) Tax Applicable Rs 5,85000 Nil Rs 11,50,000 Rs 11,50,000 Rs 1,38,000 Rs 1,75,000 Rs 5,85000 Rs 58,500 Rs 11,50,000 Rs 10,91,500 Rs 1,38,000 Rs 1,57,450 Rs 17,500
If you are not equipped to make your own financial decision, a Pension Fund Manager will invest your NPS money in a basket of equity and fixed income instruments in a pre-defined ratio based on your age. This is called the auto choice option.
Tax Saved
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Brace your Second Innings with Grace
21st February 2014