. This means that government employees now have the ability to operate three accounts. Of these, the first account (Tier I) is mandatory for everyone. The second account, Tier-II, comes with no payment restrictions and no tax benefit and the third is Tier II with tax benefit with a 3-year lock-up period. However, in the Tier II account, which offers tax benefits, investors have only one option in terms of investment choice and investment allocation. The subscriber or employee is free to choose any pension fund, but can have a maximum of 3 pension funds separately for the national pension scheme Tier II – Tax Saver Scheme, 2020. The change of FP is allowed after the expiration of the blocking period. Such a reinvestment is treated as a new investment and is blocked again for 3 years. In case of early closure of the Tier I account, contributions to the NPS Tier II Tax Saver account will not be allowed and this account will be closed after the expiration of the blocking period.
The contribution paid under the National Pension Scheme (NPS) gives entitlement to tax benefits under the Income Tax Act of 1961. The amount invested in the NPS is eligible for tax benefits under Article 80CCD (1), Article 80CCD (1B) and Article 80CCD (2) of the Information Technology Act. It is important to note that, according to Article 80CCE, the total amount of the deduction under Articles 80C, 80CCC and 80CCD(1) must not exceed Rs 1. 5 lakhs in a fiscal year. The PFRDA has issued a new circular stating that if a government employee contributes to level II of the NPS, the tax benefit available under Article 80C for the deduction of up to Rs 1.50 lakh is applicable to that investment, provided that the investment remains frozen for 3 years. . With respect to the investment choice and allocation model, the investment choice is not available to the employee. The asset class allocation will look like this: policyholders will have the option to choose any pension fund (FP) to manage their money. You can have a maximum of 3 pension funds separately for the national pension scheme Tier II – Tax Saver Scheme, 2020. The circular also stipulates that no resignation is allowed during the three-year freeze period and that the corpus may be withdrawn by his deputy or legal heir. The operational guidelines of the National Tier II Pension Scheme – Tax Saver Scheme, 2020, have been published by the PFRDA. According to the circular, any central government employee who contributes to the NPS is eligible for the program.
In early July 2020, the government had declared the Nps Level II tax savings program for eligible central government employees. “It will be a composite system with the following investment limits for pension funds: equity: 10% to 25%, debt: up to 90%, cash/money market/liquid assets – up to 5%,” the PFRDA circular states. For non-government NPS subscribers, investments in the NPS Tier I account must be made to be deducted from income and save taxes. NPS has two accounts – Level I account and Level II account – while the first is the standard account you have when opening an NPS account where the original contribution flows. However, Tier II is an optional account for non-state subscribers, and you can open it in addition to place savings in it, as it doesn`t have a lockout period. The Pension Funds Regulatory and Development Authority (PFRDA) has published the operational guidelines for the nps Tier-II Saver Scheme, 2020. This comes a month after the government announced the National Retirement Level II (NPS) tax savings program for central government employees. The central government employee who contributes to the NPS can now manage three accounts:. .