NPS: If you also want to avail the benefit of exemption in income tax through National Pension System, then this news is for you. Most people know that you get tax exemption by investing in the National Pension System, but most people do not know that investing in it can be done in many ways. You can invest in NPS in not one or two but three ways. Let us know what is the complete mathematics of investing….
National Pension System i.e. NPS is not only a good investment medium for retirement planning but it also proves helpful in saving income tax. Many people do not take full advantage of the tax benefits available under the National Pension System. Rather we would say that most of the people are not aware about it. If your employer contributes up to 10 percent of your basic salary and DA to the NPS corpus, then this amount will not come under the ambit of tax.
This money can be part of your total cost-to-company. This will reduce your tax liability significantly. You yourself can contribute up to 10 percent of your basic salary and DA to NPS. On this you can claim deduction under section 80CCD (1). Let us know in detail how NPS can help you in saving tax.
Tax benefits are available under these three sections
Let us tell you that apart from 10 percent contribution of base salary and DA under Section 80CCD (1), you can avail additional tax benefit of Rs 50,000 under Section 80CCD (1B). This is in addition to the 80C limit. But, it must be kept in mind that the deduction available under section 80CCD (1) comes under the total tax deduction limit of Rs 1.5 lakh under section 80C.
Apart from this, Section 80CCD (2) can help you a lot in tax-savings. For this, your employer will have to contribute up to 10 percent of your basic salary and DA to your NPS corpus. This limit of 10 percent is for people working in the private sector. For government employees this limit is 14 percent.
Benefit of Section 80CCD (2) in the new tax regime
It is important to know that the tax benefit available under section 80CCD (2) is available in both the new and old income tax regimes. If you are a private employee, you can ask your employer to contribute up to 10 percent of basic salary and DA to NPS. This money will be a part of your CTC, so there will be no additional burden on your employer. This can be understood with an example.
Suppose your basic salary and DA is Rs 50,000 every month. In such a situation, your employer can contribute Rs 5000 to your NPS every month. In this way he will contribute Rs 60,000 annually. This money will be taken out of your taxable salary.
These benefits will be available in the new regime
For information, let us tell you that in the new income tax regime, most of the deductions and exemptions are not available. But the benefit of deduction under section 80CCD (2) is available on contribution in NPS. The government has also given the benefit of standard deduction of Rs 50,000 in the new income tax regime from the financial year 2023-24. If you are employed then you can take advantage of this.
