NPS: Your employer can help you save tax by contributing to NPS on their behalf, if they so desire. If you do not know about this, then we are giving you information about this in detail.
If you are also employed then you will also be interested to know about the ways of saving tax. The salary structure of many people is such, in which there is no provision of tax free allowance. Even if your income tax liability is low, you can reduce it further by adopting some alternative ways of saving tax. Do you know that your employer can help you save tax by contributing to NPS on their behalf, if they so desire? Yes, if you do not know about this, then we are giving you information about this in detail.
Employee’s own contribution to his NPS account is eligible for deduction under section 80CCD(1) and not under section 80C. The limit of Rs 1.50 lakh is prescribed under section 80CCE which covers all items eligible for deduction under section 80C, 80CCC and 80CCD(1).
Know what are the rules
Deduction under section 80CCD (2) is made available to the employee in relation to the employer’s contribution to the employee’s NPS account. This deduction is given up to Rs 1.50 lakh, which is under section 80C, 80CCC and 80CCD(1). At the same time, deduction of up to 10 percent of the basic salary and dearness allowance of the employee is available under section 80CCD (2). Higher deduction of up to 14 per cent of contribution is available as a percentage of basic pay for Central and State Government employees.
Although there is no limit for deduction in respect of employer’s contribution to the NPS account of an employee under section 80CCD(2), section 17(2) of the Income-tax Act provides that the total amount of the employer’s contribution to the employee’s provident fund is In case of contribution, National Pension System and superannuation exceeds 7.50 lakh in a year, the excess in the hands of the employee will be taxed as perquisite.
In addition to the deduction up to Rs 1.50 lakh in NPS account, all taxpayers can avail additional deduction of up to Rs 50,000 under section 80CCD (1B). In total, you can contribute up to Rs 2 lakh to your NPS account and get the benefit of tax deduction.
