SBI’s NPS: The Affordable Pension Plan with Tax Benefits You Shouldn’t Miss!

India’s biggest Public Sector bank, SBI (State Bank of India) has been encouraging clients to utilize tax-saving options. This includes the National Pension System contributions (NPS) which are a voluntary retirement savings programme, created by the government in order to inculcate a commitment towards planned savings and safeguard citizens’ future via a pension.

PFRDA manages and regulates the NPS. The NPS is the singular most affordable pension plan in the world. Investors can choose their pension fund investment options and observe the increment in their balance.

SBI has two NPS programs- these are Tier 1 (a pension account that is required) and Tier 11 (an optional investment account). The minimum contributions start at Rs 500 for a Tier I account, and for a Tier II account, it is Rs 250.

The tax benefits can only be availed via Tier I. However, you can choose to withdraw the corpus anytime in Tier II. The eligibility for opening an NPS account includes RIs and Non-Resident Indians (NRIs) between the ages of 18-70.

Employee contributions to Tier I accounts are tax-exempt up to a maximum of 50,000 rupees, per section 80CCD (1B) of the IT Act. The SBI website states that investments (10% of Basic & DA) are eligible for tax deductions under 80CCE up to a maximum of Rs. 1.50 lakh.

In addition, employer contributions are eligible for a tax deduction of up to 10% of the salary (Basic + DA) under Section 80CCD (2), subject to a maximum financial threshold of Rs. 7.5 lakh (including PF, Superannuation, etc.).

At least 40% of the corpus must be invested in annuity plans.

60% of the corpus may be commuted, withdrawn in one lump payment, or divided over time up to the age of 75. It is not subject to taxes.

If the aggregate corpus is equal to or less than 5 lakh, the entire corpus may be eliminated.