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    Income tax break that individuals can still claim in new personal income tax regime

    Synopsis

    Most of the commonly available deductions such as section 80C, 80D, standard deduction etc. have been proposed to be removed but here is one tax benefit that can still be claimed by you under the new tax regime.

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    For FY 2019-20, section 80CCD (2) (employer contribution to NPS) allows the individuals to avail the tax-break over and above Rs 2 lakh.
    As announced in the Union Budget 2020, Finance Minister Nirmala Sitharaman has removed 70 commonly used tax exemptions and deductions for salaried employees who opt for the new lower personal tax rate regime. Most of the commonly available deductions such as section 80C (investments made in PF, NPS etc.), 80D (payment of medical insurance premium), standard deduction of Rs 50,000 etc. have been proposed to be removed but here is one tax benefit that can still be claimed by the individuals under the proposed new tax regime.

    The tax break on contribution to National Pension System (NPS) made by the employer is still available under the new tax regime. The tax-benefit is available under section 80CCD (2). Further, Budget 2020 has proposed a monetary limit on the tax-exempt contribution from the employer to NPS account. According to the proposal, employer's contribution to EPF and NPS exceeding more than Rs 7.5 lakh in a financial year will be taxable in the hands of an employee.
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    According to income tax law, an employee can claim a tax- break on 10 per cent of basic salary plus dearness allowance (usually available to government employees), if his/her employer contributes on behalf of employee to the Tier-I account of the NPS. Currently, there is no restriction in monetary terms for claiming the tax break under this section of the Income Tax Act.

    For example, if your annual basic salary is Rs 5 lakh and your employer deposits 10 per cent of it i.e. Rs 50,000 in NPS account then you are eligible to claim a deduction equal to this amount from your gross total income and thereby reduce your tax liability.

    Currently, this tax-benefit is still available to the employees over the above the tax-benefit of section 80C which is currently Rs 1.5 lakh for Financial year 2019-20 and additional tax benefit of Rs 50,000 under section 80CCD(1b) in NPS. For FY 2019-20, section 80CCD (2) (employer contribution to NPS) allows the individuals to avail the tax-break over and above Rs 2 lakh.

    "Under the new tax regime, while all the tax-exemptions and deductions applicable to the salaried individuals have been removed, exemption with respect to employer's contribution to NPS is still available," says Shalini Jain, Tax Partner, EY India.

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    20 Comments on this Story

    S.k. Gupta353 days ago
    It's headlines are quite deceptive as the said benefits are available only to the serving employees and not to others.
    Sameer 356 days ago
    As in all things the BJP does, even in this simple thing they have managed to create more confusion..... typical of the uneducated literates in the BJP
    Virendra Manglik357 days ago
    The IT proposals are anti senior citizen and anti-middle class. Govt thinks average middle class man is a fool. FM was advised by western economists who believe "SPEND NOW BY TAKING LOAN AND EARN LATER". IF YOU DO NOT GET JOB IN FUTURE, "COMMIT SUICIDE".
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