S. Ravi, Former Chairman of BSE(Bombay Stock Exchange)
As the model new tax regime has come into affect, taxpayers have to pay attention to the modifications and options on the market to optimize their taxes. Here are some concepts that can assist you simply try this:
1. Plan your investments: Invest in units which could be eligible for tax deductions, equal to Public Provident Fund (PPF), Equity-Linked Saving Scheme (ELSS), National Pension Scheme (NPS), and tax-saving mounted deposits. This shouldn’t be going to solely help you save taxes however moreover earn good returns.
2. Claim all tax deductions: Ensure that you just declare the entire tax deductions on the market to you. For occasion, deductions on dwelling loans, coaching loans, medical medical health insurance premiums, and medical payments. These can significantly reduce your taxable income.
3. Use Section 80C to your profit: Utilize Section 80C to its fullest by investing in schemes that qualify for deductions, equal to PPF, ELSS, NPS, and tax-saving mounted deposits. The most limit for this half is ₹1.5 lakh, so make certain that you make investments accordingly.
4. File your tax returns on time: Ensure that you just file your tax returns on time to avoid any penalties or curiosity funds. Also, e-filing your returns makes the tactic faster and further helpful.
Sujit Bangar, Founder, Taxbuddy.com
When investing inside the National Pension System (NPS) Tier 1 account, individuals ought to consider their tax liabilities fastidiously and take advantage of Section 80CCD (2), which allows for a deduction for the employer’s contribution to the NPS account. The most deduction allowed varies for the private sector and authorities employees, and any additional contributions over Rs. 7.5 lakh per yr shall be taxable.
Contrary to straightforward notion, Section has an larger limit which is the underside of three conditions: the employer’s contribution amount, 10% of Basic+DA (or 14% for central authorities employees), and the gross full income. This deduction is separate from the Section 80C limit and is not related to self-employed individuals. You will not be capable to avail of the tax benefits offered by NPS beneath sections 80CCD(1) & 80CCD(1B) in 2023, because the bounds of Section 80CCD(1) and Section 80CCD(1B) are included all through the full limit of Section 80C.
Suresh Surana, Founder, RSM India
The provisions pertaining to deduction with respect to contribution to NPS are as follows:
Nature of ContributionApplicable ProvisionsTax Deduction LimitAvailable in Old Tax RegimeObtainable inside the New Tax Regime u/s 115BACIndividual/ Employee’s Contribution to NPS80CCD(1)
Section 80CCD(1) of the IT Act provides for deduction with respect to the NPS contribution which may be lower of the subsequent:
(i) Individual/ employee’s contribution to the NPS
(ii) 10% of the Salary/ 20% of the Gross Total Income
The mixture deduction beneath half 80C, 80CCC (Contribution to Pension fund) and 80CCD (1) could be matter to the brink limit of Rs. 1,50,000.
YesNoAdditional contribution80CCD(1B)
An additional deduction of Rs. 50,000 could be on the market u/s 80CCD (1B) of the IT Act in respect of any contribution on which the final threshold limit of Rs. 1,50,000 won’t be related.
It is pertinent to note that when claiming deduction beneath this half, one should make certain that there is no duplication of declare, i.e. no taxpayer should declare the similar contribution portions beneath every sections 80CCD(1B) and 80CCD(1).
YesNoEmployer’s Contribution to NPS80CCD(2)
Section 80CCD(1) of the IT Act provides that employer’s contribution to NPS would first be taxable inside the fingers of the employee beneath the ‘salary’ head and thereafter deduction with respect to such NPS contribution which may be lower of the subsequent:
(i) Employer’s contribution to NPS
(ii) 10% (14% in case of Government employer) of the Salary
It is pertinent to note that the combination larger limit of Rs. 7.5 lakhs is related in respect of employer’s contribution in a yr to NPS, superannuation fund and acknowledged provident fund of the employee and any additional contribution could be taxable. Any contribution in additional of the
threshold limit of Rs. 7.5 lakhs could be taxable as perquisite u/s 17(2)(ia) of the IT Act.
YesYes
Thus, solely the employer’s contribution made to NPS might presumably be claimed as deduction by the employee in case of selecting new tax regime u/s 115BAC of the IT Act and accordingly, the deduction with respect to the employee’s contribution u/s 80CCD(1) and 80CCD(1B) would not be on the market beneath the model new tax regime.
Rajeev Gupta- Business Head, E-Governance Services, Religare Broking Ltd
Under the model new regime, the place the federal authorities has proposed to increase the tax rebate limit to ₹7 lakh and as well as eradicated diversified deductions equal to 80CCC, 80EE, 80EEA, 80EEB, 80G and plenty of others, we advise managing NPS contributions by the use of firm route. When you spend cash on NPS by the use of your employer, you get most tax deduction benefits. You flip into eligible for added tax deduction as a lot as 10% of wage (Basic + DA) in case of non-public agency employees and as a lot as 14% for central authorities employees beneath Section 80 CCD(2). Other NPS benefits equal to 80 CCD1 and 80 CCD (1B) could be discovered on self-contribution inside the outdated regime.
Further lump sum withdrawal as a lot as 60% of the corpus at maturity, i.e on the time of retirement, is 100% tax exempt. The annuity contribution is tax free and pension income is taxed on the related tax slab.
Archit Gupta, Founder and CEO, Clear
Especially whereas investing in Tier 1 account – Only the employer contribution in NPS is deductible u/s 80CCD(2). So for tax saving perform the investing in NPS should be considered judiciously. While investing in NPS not merely the tax aspect nevertheless completely different parts equal to growth of corpus, whole financial targets need to be considered.
Suman Bannerjee, CIO, Hedonova
Investing in NPS Tier I provides three tax deductions:
Deduction of as a lot as ₹1.5 lakh from taxable income beneath Section 80C.
Additional deduction of as a lot as ₹50,000 beneath Section 80CCD (1B) of the Income Tax Act, utterly on the market by the use of NPS funding.
The third deduction is inside the kind of employer’s contribution of as a lot as 10 per cent of wage (basic ingredient + dearness allowance) to the NPS Tier I account. It won’t be considered taxable income, which reduces the tax burden. In the case of presidency employees, it’s 14 per cent instead of 10 per cent.
Abhishek Soni, Co-founder & CEO of Tax2win
As per the model new tax regime, taxpayers normally aren’t eligible to say the deductions beneath Section 80C and funding in NPS u/s 80CCD (1) and Section 80CCD (1B) nevertheless they’re eligible to say a deduction beneath Section 80CCD(2) i.e. contribution by the employer. There are no tax benefits proper right here nevertheless it’s going to presumably help protected your retirement within the occasion you battle with self-discipline in saving. Review incessantly, stability your portfolio, and maintain true to your retirement targets to learn out of your NPS contributions beneath the model new tax regime.
C.A. Ms. Ashwini Khade- Principle Consultant – Catalyst Trusteeship Ltd
Being the social security initiative by the federal authorities of India National Pension Scheme (NPS) holds the utmost significance and has been a reliable scheme for private sector employees in need of a each day pension post-retirement. While there is no such tax revenue for NPS contribution employees, beneath half 80C of the model new tax regime, employees can arrange their wage development in such a signifies that their employer will contribute as a lot as 10% of their basic wage. This deduction is together with the exemption of employee contribution of Rs. 50,000.
Satyen Kothari, the founder and CEO of Cube Wealth
Under the model new tax regime, NPS contributions are eligible for a tax deduction of as a lot as 10% of wage along with dearness allowance (DA), and extra deductions of as a lot as Rs. 50,000 beneath Section 80CCD(1B). When investing in a Tier 1 account, individuals ought to consider the subsequent:
1. Assess the funding horizon and menace urge for meals sooner than deciding on between the two on the market funding selections – Active and Auto various.
2. Regularly monitor the effectivity of fund managers and alter between managers if required.
3. There are limits on the proportion of funding in equity units based totally on the age of the individual, which need to be intently monitored.
Somya Srivastava, founding father of Prayatna Microfinance
Managing NPS (National Pension System) contributions beneath the model new tax regime requires a cautious consideration of a variety of parts. The NPS is a voluntary retirement monetary financial savings scheme that gives tax benefits beneath every the outdated and new tax regimes. However, the tax benefits differ beneath each regime, and it is rather necessary understand these variations to make educated funding picks.
Under the model new tax regime, individuals can choose to forego deductions and exemptions and pay tax at lower fees. However, which implies they will not be capable to say deductions for contributions to the NPS Tier 1 account. This account has a lock-in interval until retirement, and withdrawals are restricted.
Given this example, it is advisable to guage the tax implications and funding horizon sooner than making NPS contributions beneath the model new tax regime. If an individual expects to be inside the lower tax bracket after retirement, they may revenue from contributing to the NPS Tier 1 account beneath the outdated tax regime. This will permit them to say tax deductions and assemble a retirement corpus that is taxed at a lower price after retirement.
On the alternative hand, if an individual expects to be inside the bigger tax bracket after retirement, they may revenue from contributing to the NPS Tier 1 account beneath the model new tax regime. This will permit them to spend cash on equity and debt units and assemble a retirement corpus that is taxed at a lower price than completely different funding avenues.
In conclusion, Somya Srivastava advises that managing NPS contributions beneath the model new tax regime requires cautious consideration of an individual’s tax implications and funding horizon. It is advisable to hunt expert guidance and think about the tax benefits beneath every the outdated and new tax regimes sooner than making funding picks.
Akhil Chandna, Partner, Tax, Grant Thornton Bharat
The National Pension System (NPS) provides tax benefits beneath every outdated and new tax regimes in India. Tier 1 NPS account is primarily meant for retirement monetary financial savings the place an individual might make a minimal contribution of INR 500 whereas opening the account. Under the model new tax regime, the contribution made by employer within the path of Tier 1 NPS account is eligible for tax deduction beneath half 80CCD (2) of Income Tax Act, 1961 with none limit. However, the employer’s contribution beneath half 80CCD(2) is restricted to as a lot as 10% of employee’s basic pay plus dearness allowance of wage in any express financial yr.
Therefore, individuals in employment might study if the employer provides the NPS revenue as part of the compensation development and accordingly decide to determine for the same which is ready to allow for deduction of such employer contribution.
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