How to Save More Tax by investing in National Pension System India

Good News for all income taxpayers of India, including NRIs and PIOs who pay income tax in India. Now, they can reduce additional 50 Thousand INR on taxable income by investing in the National Pension System (NPS) for the financial year 2015-2016. This may result in the tax saving of around 15 thousand INR, which is not a small amount. Add another 15K and you can have a foreign trip.

For those who don't know what is NPS or National Pension System, also known as National Pension Scheme, National Pension System is a contribution scheme regulated by PFRDA which helps you to save additional tax and build a huge corpus for your retirement. 

You can make the regular contribution as per your convenience e.g. monthly, yearly and choose one of the 8 fund managers to manage your funds. They are reputed mutual fund house and expert in investing money on the Indian market and that's why chose by PFRDA.

Tax Exemption by Investing on National Pension System

Recent Union Budget 2015-16 announcements have provided additional tax benefits of up to Rs.15,450 by investing up to Rs.50,000 in NPS u/s 80CCD(1B) over and above the limit of Rs.1,50,000 u/s 80C. This means you can invest in NPS for tax saving even if you have exhausted your 80C limit.


Here are some important points related to investing in NPS for tax saving purpose

80C limit not exhausted
1. If you have not exhausted your 80C Limit than you can invest up to 10% of basic salary through the employer. This is exempt from tax under section 80CCD(2).

2. You can also invest up to Rs 50,000 INR on your own. This is exempt from tax under section 80CCD(1B) over and above section 80C.


3. You can invest 10% of basic salary or total gross income on your own. This is exempted from tax under 80CCD(1) within Rs 1.50 lacs limit under section 80C.

80C limit exhausted
4. Even if your 80C limit has exhausted, you can invest up to 10% of basic salary through the employer. This is exempt from tax u/s 80CCD(2).

5. You can invest up to 50K on your own. this is exempt from tax under section 80CCD (1B) over and above section 80C.

Here is a nice infographic which clearly outlines tax benefits of National Pension System, courtesy, HDFC Bank.  Pension arm of HDFC bank, http://www.hdfcpension.com/ also allow you to invest in NPS online. Other banks like ICICI also allow you to subscribe on National Pension System but you need to visit their branches.

That's all about National Pension System. It's low-cost investment option which provides attractive market linked returns. It offers dual benefits of tax saving as well building a buys monthly retirement income. You can, at least, reduce 50K from taxable income even if you have already invested 1.5 lac under section 80C. Even NRIs can invest in National Pension System. It's a great idea from the government, given we don't have social security cover provided by other developed nations.

Other NPS, Investment, and Tax Saving Articles you may like

• 6 Reasons to Invest in NPS Account In India
• Can NRIs open NPS account in India
• How to open NRE or NRO Account online outside India?
• How to open PIS account for Trading in India
• Can you deposit INR on NRE bank account?
• 10 ways to fund your NRI banking account? 
• What is difference between NRE and NRI bank account?
• 10 benefits of NRE bank account and fixed deposits

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