People working in the software engineering sector in the country earn a lot of money, but along with this they also have to bear the heavy burden of income tax.
In such a situation, what if you can save more than Rs 50,000 in tax with the help of New Pension System (NPS)? Let’s understand the whole thing
Under the old regime of the Income Tax Act, people get the opportunity to save Rs 1.5 lakh under 80C. Whereas NPS gives people the opportunity to save tax-free income apart from this exemption limit. While the benefits of NPS can be availed in the new tax regime as well.
Benefits of NPS in the new tax regime
Under Section 80CCD (2) of the Income Tax Act, you can save tax through NPS even in the new tax regime. This can be up to 10 percent of your basic salary. In fact, the contribution made by an employee to NPS is tax-deduction in the new tax regime. Generally, in the pension scheme, an employee’s contribution of up to 10 percent of his basic salary is tax-free, in the new tax regime this limit is up to 14 percent.
In such a situation, if an employee adopts the NPS offered by his company or employer, then contribution up to 14 percent of his salary will be tax free.
More than Rs 50,000 tax will be saved
Above we talked about software engineers, whose salary is generally good. In such a situation, let us assume that the basic salary of an employee is Rs 1 lakh per month. Then his NPS contribution will be around Rs 14,000 per month. Then his overall income tax will be reduced by more than Rs 50,000.
Skip fixed deposits, invest in debt funds
If you want to increase your tax savings, then you should invest in debt funds instead of fixed deposits. In FDs, interest earned every year is taxable, whereas money invested in debt funds is taxable only when the money is withdrawn.
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