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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Retirement Products

Caselet: Mrs. Nair, aged 50, is a salaried subscriber to NPS and wants to understand the tax treatment. Which statement about the employer's contribution to her NPS account is correct under the old tax regime?

The employer's NPS contribution is deductible under Section 80CCD(2) up to the prescribed percentage of salary, and this deduction is over and above the Section 80C overall limit. It is therefore not restricted to the Rs 1.5 lakh ceiling.

  1. AIt is deductible within the prescribed percentage of salary limit under Section 80CCD(2), over and above the Section 80CCE limitCorrect
  2. BIt is always fully taxable as salary with no deduction
  3. CIt is deductible only within the Rs 1.5 lakh Section 80C limit
  4. DIt is exempt only if she withdraws it before age 60

Explanation

Employer contribution to NPS is deductible under Section 80CCD(2) up to the specified percentage of salary, and this is separate from and in addition to the Section 80C/80CCE ceiling. It is therefore not confined to Rs 1.5 lakh and not taxed in full.

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