Restructure Your CTC To Invest In NPS And Save Taxes!

None of us like it when a substantial amount is deducted from our salary as Income Tax every month.  We constantly try to  figure out various means and ways of decreasing this tax burden. In case an individual doesn’t have a home loan or an education loan then the only route through which he can save taxes is by investing in instruments under Section 80C and 80 CCF.

Overall this has a limit of Rs. 1.20 lakhs (1 lakhs under section 80C and Rs. 20,000 under section 80CCF).,Let us look at an example below to understand it better. Suppose a person has a CTC of Rs. 5 lakhs per annum, then the income tax on the same would be around Rs. 34,000 under the current income tax slabs.

The person can choose to invest Rs. 1 lakh under section 80C. He can also choose to invest additional Rs. 20,000 in Infra bonds to save under section 80CCF. By investing this amount, he can save around Rs. 12,000 in taxes. Once all these investments are done, the individual still has a tax liability of Rs. 22,000 per annum which is around Rs. 1,833 per month. In case, the individual doesn’t have a home loan or an education loan this is taxable amount will be deducted from his salary account as TDS.

In this year’s budget, the Finance Minister announced that the employer can invest up to 10% of the CTC of the employee in the National Pension Scheme (NPS) account. This amount will not be taxed to employers as the employers can claim these contributions as business expenses made by them. Also, the individual will not have to pay any tax on this amount being deposited by the employer and this investment would also not form a part of the limit of Rs. 1 lakh under the section 80-C.

By choosing to restructure his CTC and asking the employer to invest 10% of the CTC in NPS, salaried individuals can hugely benefit by saving taxes and also creating a kitty for their tension free retired life. For the example taken above, the employer can invest up to Rs. 50,000 (which is 10% of Rs. 5 lakhs) in the NPS account of the individual. This will help the individual to save an additional Rs. 5,000 per annum.

NPS is one of the best schemes available in the market for garnering savings for  retirement. The fund management costs of these funds are 0.009% per annum which is extremely low when compared to mutual funds offered by AMCs or unit linked plans offered by life insurance companies (roughly around 1% to 2.5% per annum). These low charges would in turn result in higher corpus at the time of retirement.

All you have to do save more taxes is to open an NPS account and ask your employer to re-structure your salary and make a provision of NPS in the same. To open an NPS account, you can visit designated nationalized banks i.e. Central Bank of India, Allahabad Bank, Syndicate Bank, Union Bank of India, and State Bank of India and its subsidiaries. You can also approach private banks like ICICI Bank, Kotak Mahindra Bank, Axis Bank and Yes Bank to open an NPS account for yourself. All these are known as Point of Presence (PoPs).

A detailed list with contact numbers of all the PoPs is available on website and

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