Get the Tata Capital App to apply for Loans & manage your account. Download Now

Blogs SUPPORT
Loans For You
Loans for Business
Investment
Insurance
Apply

Quick Links for loans

Quick Links for Insurance

Investment

Offers Quick Pay
Back

Equipment Finance

Avail Digital Equipment Loans
up to Rs. 1 Crore

  • Attractive ROIs
  • Customizable Loan tenure
Know More
Back

Equipment Leasing

Avail Leasing solutions
for all asset classes

  • Up to 100% financing
  • No additional collateral required
Know More
Back

New Commercial Vehicle Financing

  • First time user
  • Retail and strategic Clients
Know More
Back

Used Commercial Vehicle finance

  • Repurchase
  • Refinance
  • Top up
  • Balance Transfer
Know More
Menu  
 
Apply Now

Tata Capital > Blog > How Investing in NPS Can Help You Save Tax in the New Tax Regime?

Wealth Services

How Investing in NPS Can Help You Save Tax in the New Tax Regime?

How Investing in NPS Can Help You Save Tax in the New Tax Regime?

The Union Budget 2020 introduced a new tax regime that altered the tax slabs and offered concessional tax rates to taxpayers. Under the new regime, the tax slabs became more streamlined, and the tax rebate limit was increased. However, it also eliminated several tax exemptions, including some of the deductions available under the National Pension Scheme.

Under the new tax regime, two of the tax benefits available on the National Pension Scheme under section 80CCD are no longer available and only one is available. Nonetheless, NPS remains an attractive investment option for those seeking to save for retirement while saving on tax. How? Let’s find out.

NPS tax benefits under the old tax regime

The National Pension Scheme is a long-term investment scheme in India for retirement. This pension programme allows public and private sector employees to regularly invest in a pension account to build a corpus post-retirement.

What made NPS an attractive investment scheme are the tax benefits available under section 80CCD. Under the old tax regime, NPS tier 1 investments offered the investors the following three tax deductions-

1. Self-contribution to the NPS account of up to Rs. 1.5 lakhs can be claimed as a tax deduction under section 80CCD(1). Self-employed individuals investing in NPS can also claim this deduction on self-contribution. However, the total amount of deduction of 80 C and 80 CCD(1) cannot exceed Rs.1.50 lakhs in the previous year.

2. NPS investors, both salaried and self-employed, can claim an additional deduction of Rs. 50,000 under section 80CCD (1B), separate from the existing deductions available under section 80C.

3. Under section 80CCD(2), salaried individuals in the public and private sectors can claim employer contributions to NPS. Government employees can claim up to 14% of their salary, while private employees have a cap of 10% of their salary (basic + dearness allowance).

Changes in NPS tax benefits under the new tax regime

Under the new tax regime, the tax benefits under sections 80CCD(1) and 80CCD(1B) are no longer available. So, investors can no longer claim self-contribution of up to Rs. 1.5 lakhs and an additional Rs. 50,000 as a tax deduction.

Salaried individuals can still claim tax deductions on employers’ contributions to the NPS under section 80CCD(2). While it has reduced the benefit of investing in the scheme, especially for self-employed individuals under the new tax regime, it is still an attractive and safe investment option to plan for retirement.

Why should you invest in NPS under the new tax regime?

1. Tax-free rebalancing

Unlike mutual fund investments, you are not required to pay tax while adjusting your portfolio under NSP investment and shifting from one asset to another. So, even though the new tax regime has stripped off certain tax benefits on NPS investment, it remains an attractive tax-saving investment for those who don’t want to pay tax on rebalancing their equity and debt allocation.

2. Great returns

NPS offers a disciplined approach to investing money for long-term growth. Since NPS allows you to invest a fixed amount regularly, it helps you stay on track with your investment and build a substantial corpus by the retirement age for a secure future.

3. Regulated

The Pension Fund Regulatory and Development Authority (PFRDA) regulates investments under the National Pension Scheme. With transparent investment norms, regular fund performance reviews, and fund manager monitoring by the NPS trust, your investment is safe and professionally regulated.

Summing up

The new tax regime has eliminated some tax benefits under the National Pension Scheme. Under the new regime, investors can only claim tax deductions on employers’ contributions under section 80CCD(2). However, despite the reduced tax benefits, NPS is an excellent product to build your retirement corpus, thanks to its disciplined investment approach.

Ready to invest in your future? Talk to the experts at Tata Capital Wealth.

Manage Your Wealth With Tata Capital

Build Your Wealth with Expert Guidance from Tata Capital!

Apply now
Popular Searches
aif full form pms vs mutual fund bnpl meaning aif taxation debt investment options debt syndication perpetual bond unlisted equity shares meaning gold etf vs gold bond plot plus construction loan
Disclaimer

Most Viewed Blogs

Trending Blogs

Calculator

Personal Loan EMI Calculator

Personal Loan EMI Calculator
Home Loan EMI Calculator

Home Loan EMI Calculator
Business Loan EMI Calculator

Business Loan EMI Calculator
Used Car Loan EMI Calculator

Used Car Loan EMI Calculator
Two Wheeler Loan EMI Calculator

Two Wheeler Loan EMI Calculator
Loan Against Securities Calculator

Loan Against Securities Calculator
Loan Against Property Calculator

Loan Against Property Calculator
More Tools
Our Subsidiaries
Our Other Websites

Useful Links and Resources

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download

Policies, Codes & Other Documents

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download

Tata Capital Solutions & Services

Uh oh, something went wrong

Please try again later.