- Various queries are arising by people in regarding additional deduction of Rs. 50000 under NPS scheme for saving their tax. For clearing this doubt I am contributing a brief summary under this article for how can a Individual Assessee can claim additional benefit of Rs. 50000 by Investing under NPS Scheme.
- Earlier the deduction allowed for contribution to NPS was limited to Rs. 1lakh under 80CCD(1A). However for encouraging people to contribute towards NPS government has extended the limit for Investment in National Pension Scemeof from 1Llakh to 1.5 Lakh.
- Moreover in the Budget 2015 Finance Minister Mr Arun Jaitely has bought up a new subsection 80CCD (1B) so as to provide for additional deduction in respect of any amount paid, of upto Rs. 50,000 for Contribution made by Individual assesses under National Pension Scheme.
- This Additional benefit of Rs. 50000 is over and above the limit of Rs. 1.5 Lakh allowed to be claimed as deduction under section 80C. Therefore now, the total deduction that can be claimed under section 80C+80CCD=Rs. 2 Lakh
Let us understand this with an example.
- Mr X is in service of A Ltd since 1989, currently his basic salary plus dearness allowance is Rs. 12,00,000. He contribute Rs. 1,75,000 towards NPS , Deposit Rs. 40000 in PPF, and deposit Rs 60000 towards annuity plan of LIC which is eligible for deduction under section 80CCC ( Total Investment in NPS, annuity plan and PPF is Rs 275000. A Ltd. (Employer) contributes Rs.130000 toward NPS and gives annual bonus of Rs. 440000. Bank FD Interest of X for the previous year 2015-16 is Rs. 440000. Now his taxable income for A.Y 2016-17 will be calculated as follows.