1. Deduction is allowed to an INDIVIDUAL.
2. In case of an employee deduction shall be allowed equal to the amount contributed by the employee towards the Pension Scheme (also called New Pension System) but maximum to the extent of 10% of retirement benefit salary. If the employer has contributed any amount towards Pension Scheme, it will be added to the gross salary of the employee and also deduction shall be allowed for such contribution but maximum to the extent of:
(a) 14%, where such contribution is made by the Central Government;
(b) 10%, where such contribution is made by any other employer, of his salary in the previous year.
3. If the individual is not an employee and he has contributed to the Pension Scheme, deduction shall be allowed for such contribution but maximum to the extent of 20% of gross total income.
Maximum deduction allowed under section 80C + 80CCC + 80CCD shall be 1,50,000. It can exceed upto 50,000 because of contribution to NPS by an individual.
Limit of 1,50,000 can exceed to any extent because of employer contribution
4. Any pension received under this scheme shall be taxable.
5. Lumpsum payment received up to 60% of the total amount payable shall be exempt from income tax.
6. Amount received by the nominee on the death of the assessee shall be exempt from income tax.
As per Section 10 (12A) any payment from the National Pension System Trust to an employee on closure of his account or on his opting out of the pension scheme referred to in section 80CCD, to the extent it does not exceed 60% of the total amount payable to him at the time of such closure or his opting out of the scheme shall be exempt from Income Tax.
As per Section 10 (12B), any payment from the National Pension System Trust to an employee under the pension scheme referred to in section 80CCD, on partial withdrawal made out of his account in accordance with the terms and conditions, specified under the Pension Fund Regulatory and Development Authority Act, 2013 and the regulations made thereunder, to the extent it does not exceed 25% of the amount of contributions made by him shall be exempt from Income Tax.