SAVE Tax with new NPS provisions!!!

This article is about NPS (National Pension Scheme) or New Pensions System as some may know, which is a loose-ended replacement of the erstwhile Pension System prevelant in India. Although not a 100% replacement, this is the next best thing, and thus understanding it better is a good idea.

For all those trying hard to save Taxes while working their way around the Indian Income Tax system, the following may help in clarifying doubts / providing more avenues.

As per Income Tax provisions effective in 2015-16, investments in NPS can be done in three ways:

• Employee contribution, under 80C
• Direct investment in NPS (outside of your employer), under 80CCD(1B)
• Employer contribution, under 80CCD(2)

 Let's look at these in more detail:

Employee contribution, under 80C

Any Indian (that has a PRAN) can invest in NPS by contributing to their NPS account by investing a minimum of Rs. 500/- per month or a minimum of Rs. 6000/- annually. This investment into NPS can be deducted from the person's taxable income (subject to a maximum capping of Rs. 1,50,000/- capping under 80C).

Although a good idea, this however, is generally futile since most people (who have been working for a while), have already reached their Rs. 1,50,000/- 80C limit via other means (for e.g. Life Insurance / ULIP / PF etc.). Then investing in NPS is although good in the long-term, however, it does not contribute to saving tax for the current financial year.

Direct investment in NPS (outside of your employer), under 80CCD(1B)

Any Indian (that has a PRAN) can invest directly into NPS, without the support of his / her employer. This facility has been available for a while, and is the oldest form of investing in NPS. Till recently, the caveat to this form of investment was that this did not have any Tax Exemption.

Although modified earlier, as of 2015-16, the Income Tax Provisions are such that investments in NPS (made directly) up to Rs. 50,000/-  can be deducted from the person's Taxable Income. To clarify, this doesn't mean that one can't invest more than Rs. 50k, but that only the first Rs. 50k of that amount can be deducted from his / her taxable income.

For e.g. Lets assume that Ms. Lata's has consumed Rs. 1,50,000/- 80C investment options (via Life Insurance / PF investments) her net taxable income is Rs. 3,75,000/-. Now lets assume that she invested Rs. 1,50,000/- directly to NPS (outside of her employer's assistance), then the next taxable income for her would become Rs. 3,25,000/- (i.e. 3,75,000 - 50,000). So although the entire sum of Rs. 1,50,000 was invested into NPS, only the first Rs. 50,000 was deducted from taxable income.

Employer contribution, under 80CCD(2)

The third and the most unclear & interesting section is the 80CCD(2) that allows an employee to save much more tax than was possible earlier.

Under this section, (apart from the above two clauses), an employee can request his / her employer to deduct a given sum from the monthly salary, and invest in NPS. This contribution (upto a maximum of 10% of Basic Pay) can be additionally deducted from the employee's taxable income, which in some cases can be a big boon to the net tax outflow in the financial year.

Example for all above sections

Lets take an example that elaborates all the sections given above:

Lets assume that Ms. Lata's Basic pay is Rs. 11,00,000 (11 lakh) and she has invested Rs. 1,00,000 in Life Insurance and Rs. 40,000 in ELSS Funds, as well as Rs. 10,000 in NPS (under section 80C). Further, she directly invested (outside of her employer's assistance) invested Rs. 50,000 in her NPS account (under section 80CCD(1B) ). Lastly, she requested her employer to invest Rs. 10,000/- per month in her NPS account under Section 80CCD(2).

Then her net taxable income would be as follows:

Taxable income = 11,00,000 
                   - Rs. 1,50,000 under 80C      - max (1.5 lakh)
                   - Rs.   50,000 under 80CCD(1B)- max (50k)
                   - Rs. 1,10,000 under 80CCD(2) - max (10% of Basic)
               = 11 lakh - 1.5 lakh - 0.5 lakh - 1.1 lakh
               = 7.9 lakh

This should clarify all doubts pertaining to investment in NPS for the financial year 2015-16.

PostgreSQL Certification

Recently, someone asked for some inputs before going ahead with a PostgreSQL Certification.

From what I know, outside Japan, EnterpriseDB is the only Consultancy that offers Certification services consistently over the past few years. Having recently cleared one, I had a few things to say therein, and thought I'd rather enlist them as a full-blown post here.

Disclaimer: I reside in India, and thus the feedback below is quite possibly local to my own experience, and / or, to this geographical location. Also, probably things have changed since I gave this Certification a few months back, and so as mentioned below, YMMV:

• Concept
• The PostgreSQL Certification (from EnterpriseDB) is split into two parts
• Associate Certification
• Cost: $200
• Scope: Basic PostgreSQL training
• Online Training
• Cost: $1200
• Online Training recommended but not mandatory, to clear the Certification
• Professional Certification
• Cost: $200
• Scope: Advanced PostgreSQL training
• Online Training
• Cost: $1200
• Online Training mandatory, before clearing the Certification
• Online Trainings
• Essentially On-Demand Training sessions
• Live-Recordings of training sessions
• Allow at the maximum 42 days to learn at your own pace
• Tests
• Allow at the maximum 42 days to attempt at your own pace
• Value
• EnterpriseDB is (now) a well known name in the PostgreSQL consulting world. Amongst most others that I know, I've seen only this Consultancy offer Certification services consistently over the past few years.
• Although PostgreSQL is decades old, (for a large part of the closed-source world) it is relatively nascent in the Enterprise arena, and thus there is an utter shortage of good DBAs. As is with most other job hunts, the cream (of PostgreSQL DBAs) get hand-picked from the mailing lists, some get picked-up by references, but most others have to prove their mettle in technical rounds. In such situations, when a candidate is to compete with a big-pile of resumes, a 'Certification' certainly puts you on top of the stack.
• Cost
• I come from India and am quite amazed at the scope of bargaining possible when trying to go for one of the available online Training courses (mind you, only trainings, the certification costs were non-negotiable). YMMV in other countries, but I certainly would recommend at least attempting negotiations, (especially, if you're paying for the certification yourself).
• Quality
• The Online variant of the training, are recorded sessions and having read about a few of the trainers, I think I have a fair idea why there is heavy MTI (mother tongue influence) on the Pronunciations, despite the trainer desperately trying to anglicize it. Similarly one could see repetitive grammatical / MTI related issues which come in form when the speaker isn't primarily English spoken. This isn't a show-stopper, but is something that could help in building expectations before enrolling.
• For e.g. Instead of going to its 'backside', I'd rather go 'behind' it.
• Another aspect of Quality is that the sessions are aimed at Novices. Its quite understandable that the trainer takes things pretty slow at places, but if you're already a DBA and aiming to just 'brush through' this training to give the certification, then one must mention that you're going to torture yourself to frustration :). Putting it more accurately, you're probably going to really miss that the video doesn't allow you to play the video at 2x or 4x speed.... (a-la Coursera).
• Another aspect of this, is that it seems the training materials are conducted with trivial amount of editing. That sounds economical, but at times you feel that the editing team, could have clipped the odd 'aaaa... I think the internet is down, or probably some maintenance is going on at AWS...' during a hands-on class-session. These are rare, but some avoidable clips could be edited out, since it just adds to the wait time.
• The instructors probably did a good job explaining the system. I wasn't expecting Tom :) or any of Greg or Josh to start with, but they get the job done, and that's what counts.
• The slides on the other hand, seem to be prepared by someone knowledgeable and with some decent experience handling PostgreSQL.
• To be fair, the training tries to cover a large ground, and in a short training like this, one obviously can't cover all aspects of such a huge topic. All-in-All, it does give essentials to get a Novice DBA going.
• Test
• The Test (attempt) is "not" conducted in a Pearson Vue / Prometric center as you'd probably expect. You can give the Test from anywhere. I am sure, I was quite impressed knowing about this convenience. I chose to give my attempt from my office at a lean hour, and it was done in a jiffy.
• For those, who aren't very confident about giving the Test and instead prefer to 'Google' answers (now that they know its in a convenient location), be fair-warned, as in most cases, the people who set the tests (I know at least one!) are some pretty smart people and probably they've already accounted for this, by giving you 'just about enough time' that you'd effectively be penalizing yourself by expecting yourself to 'search' your way through for all answers.
• On the flip-side, to recommend, I must say that Googling a trivial doubt or two, is probably okay, as long as you are 'very' sure about the timer that ticks along pretty fast. The key to this recommendation, is, as always, be very thorough about the PostgreSQL online Documentation. If you know where to find things, you're probably going to do just fine.
• Test Interface:
• The interface is a no-brainer, and gets out of the way to enable you to focus on the Test. To note, just like any other test-interface, I quite liked the practise-test to get you to feel the Test, before the actual attempt.
  
• Ensure you try the 'check later' option to see how it works, at least I found it helpful / useful to review things at the end.
• For those with a bad-connectivity, it does allow you to 'continue' a test, if you get disconnected. Although I didn't get to try it myself, a close friend did find himself unable to proceed in the test and promptly emailed the Training Coordinators about it. They (took a while to get back but) recommended a better internet-connection and gave him a re-attempt.
• The only caveat with 'continuing' is that the questions already attempted remain 'fixed' and unmodifiable. The candidate was only allowed to attempt the 'remaining' questions with the 'remaining' time on the test-timer.
• Test Results
• The results are generally out within a few business-hours. Mine came within 2 (US) business-hours. Another friend, who similarly did attempt the test, didn't hear a word for a little more than a weekend. Her fears were proven correct when she realised that she didn't clear. Re-attempts are possible, but they'd not just cost extra (just the certification cost) but currently only three attempts are possible for 'any' Test.
• Recommendation
• Associate
• Officially, a Training isn't required to give this Test.
• However, if you take a Training session, an Test-attempt is free.
• My recommendation? If you're a seasoned PostgreSQL DBA, you'd probably do okay without it... if you are able to brush through the training, it certainly wouldn't hurt.
• Professional
• Officially, a Training is mandatory.
• As with Associate, you get an Test-attempt for free.
• I'd say that the Training is just an extension of what the Associate Training was. 60% of the modules are similar, with extra Labs + additional modules depending on the topic.

All the best :) !