In the Union Budget 2024, Finance Minister Nirmala Sitharaman introduced a new pension scheme under the National Pension Scheme (NPS), named NPS Vatsalya. This scheme is designed to benefit the parents and guardians of minor children.
Key Features of NPS Vatsalya
- Contribution by Parents and Guardians: The plan allows parents and guardians to make contributions for their minor children.
- Conversion to Non-NPS Plan: Upon the child reaching the age of majority, the NPS Vatsalya plan can be seamlessly converted into a non-NPS plan.
Benefits of NPS Vatsalya
- Early Pension Planning: The scheme empowers parents and guardians to plan pensions for their children from an early stage.
Increase in NPS Contribution Limits
Finance Minister Sitharaman also announced an increase in the National Pension Scheme (NPS) contribution limits for employers in the private sector:
- Increased Limit: The contribution limit for employers has been raised from 10% to 14% of the employee’s salary.
- Tax Benefits: The deduction of expenditure by employers towards NPS is proposed to be increased to 14% of the employee’s salary. This applies to employees in the private sector, public sector banks, and undertakings opting for the new tax regime.
Overview of NPS
The Central Government introduced the NPS to help individuals save a portion of their income for retirement, which will later be transformed into a pension.
Eligibility for NPS
- Eligibility Criteria: Any citizen of India, whether a resident, non-resident, or Overseas Citizen of India, can open an NPS account.
Tax Benefits Under NPS
- Section 80 CCD (1): Individuals can claim tax benefits for NPS investments up to Rs. 1.5 lakh under Section 80 CCE.
- Section 80CCD (1B): Subscribers can claim an additional deduction of up to Rs. 50,000 for investments in NPS (Tier I), which is above the Rs. 1.5 lakh tax exemption under Section 80C of the Income Tax Act, 1961.
Multiple-Choice Questions (MCQs):
1. What is the main feature of the NPS Vatsalya scheme introduced in the Union Budget 2024?
A. It provides pension benefits exclusively for minors.
B. It allows parents and guardians to contribute to a pension plan for minors.
C. It converts all NPS plans into non-NPS plans upon reaching adulthood.
D. It increases the NPS contribution limit for employees in the public sector.
Answer: B. It allows parents and guardians to contribute to a pension plan for minors.
2. At what age can the NPS Vatsalya plan be converted into a non-NPS plan?
A. 16
B. 18
C. 21
D. 25
Answer: B. 18
3. What change was announced regarding the NPS contribution limit for employers in the private sector?
A. Increase from 8% to 12%
B. Increase from 10% to 14%
C. Increase from 12% to 16%
D. No change was announced
Answer: B. Increase from 10% to 14%
4. Under which section can individuals claim tax benefits for NPS investments up to Rs. 1.5 lakh?
A. Section 80C
B. Section 80CCD (1)
C. Section 80CCD (1B)
D. Section 80CCE
Answer: B. Section 80CCD (1)
5. What additional deduction can NPS subscribers claim under Section 80CCD (1B)?
A. Up to Rs. 1 lakh
B. Up to Rs. 1.5 lakh
C. Up to Rs. 50,000
D. Up to Rs. 75,000
Answer: C. Up to Rs. 50,000