The largest public sector bank of India, the State Bank of India or SBI, is encouraging citizens to invest in the National Pension System or NPS, which is backed by the Government itself, by informing them about its tax benefits. If you are hearing about the National Pension Scheme for the first time then let us brief you about it. NPS is a retirement plan for which anyone can voluntarily register. Investors make pre-defined contributions, which are just a small portion of their salaries, towards the scheme where the pool funds get accumulated for their retirements.
Tax Benefits of NPS At SBI
NPS is governed and regulated by PFRDA, and it is considered one of the world’s lowest-value pension schemes. Subscribers can track their own investments while they grow and check different streams in which they are invested.
So, SBI is presently offering two NPS schemes- Tier 1, which is a mandatory and pension account & Tier 2, which is an investment scheme and voluntary.
Investors can contribute a minimum amount of ₹500 in Tier-1 and ₹1,000 for Tier-2.
Tax Benefits
“All citizens of India including RIs and Non-Resident Indians (NRIs) between the age group of 18 to 70 years can open an NPS account.”
As per the SBI website, “For Tier, I account, in regards to the employee contribution, tax exemption under section 80CCD (1B) of the IT Act is applicable on the contribution up to ₹50,000. Also, tax deduction under 80CCE for investments (10% of Basic & DA) within an overall limit of Rs. 1.50 lakh is also available”
Further, “in the case of employer contribution, tax deduction up to 10% of salary (Basic + DA) u/s 80CCD (2) subject to a monetary ceiling of ₹7.5 lahks (includes PF, Superannuation, etc.) is applicable.”
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What are the Exit Options for the Tier 1 NPS Scheme offered by SBI After the Age of 60 Years?
An investor should have to invest his or her minimum of 40% of the total corpus in an annuity scheme.
60% of the total corpus can be withdrawn in a lump sum or in instalments anytime for up to the age of 75 years that will be tax-free.
If the accumulated pool of funds is less than or equal to ₹5 lahks then the whole amount can be withdrawn.
