Income Tax

Income tax savings: How to claim additional ₹50,000 deduction towards NPS

  • NPS contribution statement for this year can be downloaded from NSDL website
  • An NPS subscriber can submit the transaction statement as an investment proof.

Income tax savings : By this time, you might have received an intimation from your employer asking you to submit investment proofs in support of investment-declaration made in the beginning of the financial year. The employer then verifies the documents and adjusts the TDS before the end of the financial year. Contributions under NPS Tier I account qualify for deduction under the applicable sections of the Income Tax Act, 1961.

According to NSDL, an NPS subscriber can submit the transaction statement as an investment proof. It can be downloaded by logging into NSDL website. (www.cra-nsdl.com)

How to download NPS contribution receipt :

1) After logging into by entering user id and password, select the Investment Summary tab

2) From the sub menu, select ‘Voluntary Contribution Statement’

3) Select the relevant year. NPS contribution statements can then be downloaded for different financial years.

You should avoid making last-minute investment in tax-saving instruments. Investments should be linked to your overall financial goal, not simply for saving taxes.

In case you could not submit proofs or make tax-savings investments in time and excess tax has been deducted by your employer, you can claim refund when you file your income tax returns. But remember that you have to make tax-saving investments before the end of the financial year.

NPS income tax savings benefits

Currently, investment of up to ₹50,000 in a financial year in Tier I NPS account qualifies for tax deduction under Section 80CCD (1B) of the Income Tax Act. It is applicable for salaried as well as self-employed.

In case your employer is also contributing towards your NPS account, which is mandatory for government employees (except Armed Forces) who joined services after 1st January 2004 and voluntary in case of those working in private sector, an additional deduction of up to 10% of salary (basic + DA) irrespective of any limit qualifies for income tax deduction under Section 80 CCD(2). This is an additional benefit to save income taxes over and above the limit of ₹2 lakh as mentioned earlier.

The total amount of deduction under Sections 80C, 80CCC (investment in pension plan offered by an insurer) and Section 80CCD (1) (for NPS) cannot exceed Rs. 1.5 lakh in a financial year. So including the Section 80CCD (1B) benefit of ₹50,000, an NPS subscriber can claim an income tax deduction benefit of up to a total of ₹2 lakh.

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