Investing in NPS to save income tax benefits, learn how to invest

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There are many tax-saving investment instruments available in the market, which can reduce your tax liability. When selecting a tax-saving investment, you should try to understand the risk, expectation of returns, cash requirements and the broad needs of your financial planning.

We are telling you how you can save as much tax from the National Pension Scheme (NPS). Recently, an announcement made by the government has made NPS attractive.

NPS is a long term tax-saving investment product, which is maturing on reaching the age of 60 years. Before maturity, you are not allowed to withdraw more than 20 percent of the amount. In a financial year, the investment up to Rs 50,000 in NPS is exempt under Section 80 (CCD), it can go up to 1.5 lakh rupees or more under section 80C. Which gives the benefit of the total tax deduction up to Rs 2 lakhs.

Recently, the government said in an announcement that NPS has been made more tax-friendly. Earlier, only 40 percent of the NPS amount on maturity was tax free and another 40 percent was necessary for the annual salary purchase. The remaining 20% ​​is either fixed for investment or allowed to withdraw.

NPS investor contributes to his retirement account and the employer also contributes to such an employee’s account. Customers contribute to their account without any definite benefit, and the amount of return depends on total carpus and income from that money.

National Pension System (NPS) was started in January 2004 for government employees. However, it was expanded to all citizens in the year 2009.

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