NPS deposit, withdrawal: What to do before June 30

The income tax department has added a special provision in latest ITRs for tax-saving investments, including NPS, made during April and June and claiming tax deduction for FY20

NPS deposit, withdrawal: What to do before June 30

Due to the coronavirus pandemic, the government had extended the last date till June 30 for making various investment/payment for claiming deduction for FY 2019-20. It includes National Pension Scheme (NPS) and other Section 80C investments like PPF and NSC. To incorporate this deadline extension, the income tax department has added a special provision in latest ITRs or income tax return forms when a taxpayer can mention details of tax-saving investments made during April and June and claim tax deduction for FY20.

Meanwhile, pension fund regulator PFRDA has eased NPS withdrawal, both lump-sum and partial, process due to the coronavirus pandemic. This one-time exemption is allowed only till 30th June 2020.

The nodal offices or point of presence NPS service providers have been advised to accept the scanned and self-certified images of documents through digital means as a special case and process their withdrawal requests of NPS subscribers.

After submission of withdrawal documents by NPS subscribers, it is the responsibility of the nodal officers/POPs to check the genuineness of the documents and verify the identity of the subscriber before authorizing their withdrawal requests in the CRA or central record keeping system.

Alternatively, subscribers can also use the online facility to upload withdrawal-related documents in the CRA system while initiating online withdrawal request.

In April, PFRDA had allowed NPS subscribers to withdraw funds from their NPS accounts to meet expenses related to Covid-19 treatment as the pandemic falls under the category of critical illness which is life threatening in nature.

It is to be noted that from April, new income tax rates came into effect. However, the old tax slabs will also remain in effect, giving a choice to the individual to opt between the two.

You will not be eligible for some of the tax benefits on NPS contribution if you opt for the new tax rates.

Even if you opt for the new tax rates, you can still claim income tax deduction on employer contribution towards employee’s NPS account. If your employer is contributing towards your NPS account, a deduction of up to 10% of salary (basic + DA) irrespective of any limit qualifies for income tax deduction under Section 80 CCD(2).

For central government employees enjoy a higher limit of 14% of the salary. For others, the limit is 10%.