What is scheme A in NPS?

I wasn’t aware of this NPS scheme. But when I had to opt for the NPS scheme for my father, I got to know about this concept. The Indian government introduced the National Pension Scheme (NPS), an investment-based retirement programme. The Pension Fund Regulatory and Development Authority oversees and manages this programme (PFRDA). Let me tell you what is scheme A in NPS.

What is NPS scheme A?

The NPS scheme A is also known as Tier 1 scheme.

This account is eligible for tax deductions of up to Rs. 1.5 lakh per year under Section 80C and an extra Rs. 50,000 per year under Section 80CCD (1B).

This is a lifelong retirement account that cannot be withdrawn from. You can redeem 60 percent of the corpus upon maturity, or at the age of 60, which is tax-free. An annuity purchase of another 40% is required by law. The remaining 20% may be utilised to purchase an annuity or may be withheld after paying taxes. The NPS corpus can be claimed at retirement or 60 percent of the total accrued corpus. It will be tax-exempt beginning in FY 2020–21, according to statements made in the Union Budget 2019. Now you know about scheme A in NPS.

What are NPS tax advantages for investments?

• You as an NPS subscriber may claim tax savings on investments up to Rs. 1.5 lakh under section 80C of the Income Tax Act of 1961.

• The deduction is included in section 80C total upper limit of Rs. 1.5 lakh.

• Participants in NPS are eligible for additional tax breaks on investments up to Rs. 50,000 made in excess of the section 80CCD maximum of Rs. 1.5 lakh (1b).

• Tax benefits can be recovered on employer contributions up to 10% of the employee's basic pay under Section 80CCD.

• In addition to the investment limits of Rs. 1.5 lakh under Section 80C and Rs. 50,000 under Section 80CCD (1b) (2). 

• Sole employees are eligible for this deduction, and there is no maximum bound on it.

I hope you understood what is scheme A in NPS.