New Delhi: Finance Minister Nirmala Sitharaman launched the <a href="https://time.news/should-money-be-invested-in-nps-vatsalya-for-children-know-why-experts-opinions-are-divided/" title="Should money be invested in NPS Vatsalya for children? Know why experts' opinions are divided”>NPS Vatsalya Yojana last week. It is an investment plan to secure retirement savings for minor children. In this, the account is opened in the name of the child. However, parents or guardians can invest in NPS Vatsalya on behalf of the minor child. In simple words, what the National Pension System (NPS) is for you, the same NPS Vatsalya is for your child.
The question comes whether tax saving can be done by investing in it like NPS? In fact, apart from building a retirement corpus, NPS also helps you save tax. Investing in NPS provides tax benefits in both the tax regimes. It has come to light in many media reports that tax benefits are also available on investing in NPS Vatsalya. However, it is not completely clear to many people whether they will get the benefit of tax cut or not.
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How much tax deduction is available in NPS?
Investors get the benefit of tax deduction by investing in NPS. This benefit is available in both new and old tax systems. This tax benefit is available under sections 80CCD (1), 80CCD (1B) and 80CCD (2) of Income Tax.
Under Section 80CCD(1), you can avail tax deduction of maximum Rs 1.5 lakh in a financial year. This deduction is part of the deduction available under section 80C, section 80CCC and section 80CCD. Under Section 80CCD (1B), an additional deduction of up to Rs 50 thousand is available for contribution to NPS. In this type, a total tax deduction of Rs 2 lakh is available on investment in NPS.
How much tax deduction is there in NPS Vatsalya?
Some media reports have claimed that by investing in NPS Vatsalya, subscribers can claim tax benefits under Section 80CCD(1) and Section 80CCD(1B) of Income Tax. That means here also a tax deduction of Rs 2 lakh can be made like NPS. But this is not correct.
According to the news published in our associate Economic Times, Sumit Shukla, MD and CEO of Axis Pension Fund, says that at present there is no tax benefit for parents under NPS Vatsalya. Pension Fund Regulatory and Development Authority (PFRDA) said that it has not yet issued tax notification for NPS Vatsalya. If any change or new provision is introduced in this, it will be announced in the upcoming budget.