The State Bank of India (SBI), the largest financier and public sector bank (PSB) in India, advises customers to utilise tax-saving opportunities by contributing to the National Pension System (NPS). The Union government created the NPS, a voluntary retirement savings programme for investors, to help them make a specific pledge towards scheduled savings and protect the future in the shape of a pension.
The NPS is managed and governed by the Pension Fund Regulatory & Development Authority (PFRDA). The NPS is considered the most cost-effective pension option available on the market. Users can select their own investment strategies and pension fund, and they can watch their money grow.
SBI offers two NPS programmes: Tier I (which requires a salary account) and Tier II (which is an optional investment account). While one can open a Tier I account with Rs 500, for a Tier II account one needs to invest Rs 1,000 initially.
Despite having the ability to take corpus at any time, the Tier II account is not eligible for any type of Income Tax benefit, unlike the Tier I, where the customers can avail tax benefits. All Indian residents, including RIs and non-resident Indians (NRIs), can open an NPS account in the SBI. However, to open an NPS account at SBI, one must be between the ages of 18 and 70.
Employee contributions to Tier I accounts enjoy tax exemption up to a limit of Rs 50,000 annually, per section 80CCD (1B) of the Income Tax Act. The SBI claims that assets —ie, 10% of basic and dearance allowance (DA)—are eligible for tax exemptions under 80CCE up to a maximum of Rs 150,000 per annum.
In addition, employer donations are eligible for a tax reduction under Section 80CCD (2) of up to 10% of the wage (basic + DA), with a maximum cash deduction of Rs 750,000 (including provident fund, superannuation, etc) per annum.
A minimum of 40% of the capital must be put into pension plans.
Sixty per cent of the corpus may be transferred, taken all at once, or divided over time for beneficiaries up to the age of 75. Taxes are not due on it.
If the total corpus is equal to or less than Rs 500,000, the complete corpus may be eliminated.
