NPS-National Pension System: In order to activate a frozen NPS account, you will have to pay a penalty of 100 rupees per year with minimum contribution. Its last date is 31 March 2021. If someone forgets, then his future planning will get stuck.
National Pension System i.e. NPS is the retirement saving scheme of the government. It was launched by the central government on 1 January 2004. There are two types of accounts in this scheme. Tier-1 and Tier-2. Opening of NPS Tier-1 account is mandatory.
To keep it running, it is necessary to deposit at least Rs 1,000 every year. If you do not have minimum contribution in Tier-1 account, the account will be dormant.
To resume NPS account, with a minimum contribution, a penalty of Rs 100 will have to be paid every year. Point of presence (POP) charges will also be added to revive the NPS account.
Any Tier-1 account holder can open a Tier-2 account. It can be deposited and withdrawn at will. This account is not compulsory for everyone.
It depends on your wish. If the Tier-1 account freezes, then the Tier-2 account is automatically deactivated. By the way, minimum contribution is not required in Tier-2 account.
The deduction can be claimed under the three sections of Income Tax law for the amount invested in NPS. SECTION 80 CCD (1): This deduction falls under 80C. The maximum investment limit in this is 1.5 lakh rupees. You can invest up to 10% of basic salary or up to Rs 1.5 lakh, whichever is less. Section 80 CCD (1B): Additional deduction up to Rs 50,000 is available. This exemption is available beyond section 80C.
The deduction is available on the contract of the company in Tier-1 NPS account of Pension 2 employee. This can be up to a maximum of 10 percent of the employee’s basic salary (14 percent in the case of central employees). This deduction is also available in the new system of income tax. You can save tax under section 80 CCD (2) even after using section 80 CCD (1) and section 80 CCD (1B). As per the existing laws, deduction is available on the contract of the company in the NPS account of the employee. You can claim maximum deduction up to 10% of salary. Maximum 14 percent deduction is available in the case of central government employees.
Let’s say that your annual basic salary is 8 lakh rupees. Your company contributes Rs 80,000 to a Tier-1 NPS account. In that case, you can claim deduction of 10% of your basic salary i.e. Rs 80,000.