Ch.8 · Dividend and STT Taxation · hard
What is the tax benefit of investing in mutual funds through a 'National Pension System (NPS)' vs direct mutual funds?
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EXPLANATION
NPS offers richer tax benefits: Section 80CCD(1) deduction up to 10% of salary/20% of gross income, plus Section 80CCD(1B) additional ₹50,000 deduction. At maturity, 60% is tax-exempt (40% must be annuitised). Equity mutual funds (ELSS) offer only ₹1.5 lakh 80C deduction. However, mutual funds have better liquidity and flexibility. For investors maximising tax efficiency, NPS can complement mutual funds.
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