Before we begin to understand
whether the deduction for NPS under the new tax framework is accessible or not
it is basic to understand the sorts of deduction accessible for contribution to a NPS Fund.
Deduction for NPS under
the Income Tax Act is accessible just to an Individual under section 80CCD
which falls under Chapter VI-A.
The notable highlights of section80CCD for deduction towards contribution to NPS are given underneath:
1. The deduction under this section
is accessible just for contribution to the 'New Pension System' (NPS).
2. The deduction is accessible just
to an individual who is-
(I) a focal government employee, or
(ii) a private part employee, or
(iii) an independently employed.
3. The contribution to a NPS
account made by the accompanying people meet all requirements for the deduction
from the gross absolute income of the assessee or person
(I) by the local government, for a
focal government employee,
(ii) by the business of the person,
for a private part employee,
(iii) by the individual himself.
4. There are three kinds of
deduction accessible under this section for contribution to the NPS Tier-I
account. These are:
(I) Under section 80CCD(1): The deduction is accessible for the entire measure of employee's or self
contribution to the NPS account subject to the accompanying roof
(an) on account of an employee
(both focal government and private area), 10& of his compensation of the
earlier year,
(b) on account of an independently
employed individual, 20% of his 'Gross Total Income'.
(ii) Under section 80CCD(1B): An
extra deduction, subject to a limit of Rs. 50,000 is accessible to a The individual on the off chance that he contributes any aggregate to the NPS
Tier-I account in a budgetary year.
(iii) Under section 80CCD(2): An
extra deduction under sub-section (2) is accessible for the business'
contribution to the NPS record of the employee. The deduction is constrained
to:
(a) 14% of the compensation
of the earlier year on account of a focal government employee,
(b) 10%of the compensation
of the earlier year on account of some other employee.
The powerful Budget year 2020-21 (or
the appraisal year 2021-22), there will be two tax regimes for individual income
tax purposes.
1. One tax regime called as Old tax regime under which an individual can guarantee all the allowable deductions and
exceptions in registering his all-out income and afterwards figures the tax
payable according to the tax rates indicated in the important Finance Act. This
regime is similar which is proceeded in FY 2019-20 or for AY 2020-21. This
technique for calculation of income and tax is proceeded in AY 2021-22 and is
named as 'Old regime of tax'.
2. Another tax regime called a New
tax regime under which an individual can pay income tax on his absolute income
at a confessional or lower rate when contrasted with Old tax regime. In any
case, in the new tax regime, the taxpayer needs to forego certain deductions
and exclusions while processing the all-out income and afterwards registers the
tax payable according to the tax rates determined in Section 115BAC of the
Income Tax Act, 1961. This regime is recently presented from AY 2021-22 or FY
2020-21.
The new tax regime is discretionary
for a taxpayer. At the end of the day, a taxpayer may choose the 'old regime of
tax' or may settle on the 'new regime of tax'. Anybody technique for tax regime
might be picked by the individual or HUF according to his desire.
Under the new regime of tax, the
tax rates are indicated in section 115BAC of the Income Tax Act, 1961.
Under section 115BAC(2)(i), the all
out the income of an Individual and a HUF will be figured between Alia with no
exclusion or deduction under any of the arrangements of Chapter VI-An other than the arrangements of sub-section (2) of section 80CCD or section 80JJAA.
Section 80JJA is applicable for an
assessee having business income and consequently not talked about here.
Section 80CCD(2) as expressed above
is identified with the deduction for the business' contribution to the NPS
record of the employee. As expressed above, deduction under section 80CCD(2) is
an extra deduction under the old tax regime and it proceeds in the new tax
regime.
On the face, it is giving the idea
that one can get an extra tax deduction for the business' contribution to the
NPS record of the employee in the new tax regime. This is on the grounds that
section 115BAC(2)(i) despite the fact that confines any deduction under part
VI-A yet permits a deduction under section 80CCD(2) which is considered the
business' contribution to the NPS record of the employee.
Be that as it may, this isn't the
substantiates reality. This deduction has no extra tax advantage. This deduction
is given also on the grounds that, under section 15, the business' contribution
to the NPS record of the employee is remembered for the all-out income of the
employee as 'Income from Salary'.
According to section 17(1)(viii),
Salary incorporates the contribution made by the Central Government or some another boss in the earlier year, to the record of an employee under an annuity
the plot alluded to in section 80CCD.
NPS Tier-1 is the told annuities
conspire for section 80CCD.
Henceforth, in the principal
the occasion, the whole measure of the business' contribution to the NPS record of
the employee is incorporated as 'compensation income' of the employee. From
that point, a deduction under section 80CCD(2) is permitted to the accompanying
degree
(a) 14 per cent of the compensation
of the earlier year on account of a focal government employee,
(b) 10% of the compensation
of the earlier year on account of some other employee.
On the off chance that the
business' contribution surpasses the measure of deduction the equivalent gets
taxable.
Along these lines, the proportion
of deduction open under section 80CCD(2) is from the beginning included as pay
income in the total income of the employee. To keep up a vital good ways from
taxation of the identical in the ownership of the employee, an additional
the deduction is allowed from the total income under section 80CCD(2) and it is
continued in the new tax regime.
In the event that the measure of
a manager's contribution is equivalent to the measure of deduction, at that point,
there are no extra tax advantages to the employee. The position is the
equivalent under the old tax regime just as the new tax regime. No extra
deduction is permitted as such under the new tax regime.
The image looks ruddy just when
section 115BAC is perused in disengagement. In the event that the equivalent is
perused with section 17(1)(viii), at that point one will find that there is no
'extra' tax advantage under the new tax regime.
It must be recollected that section
115BAC(2) considers deduction under section 80CCD(2) as it were. The extra deduction of Rs. 50,000 for contribution to NPS account by the employee, which
is as yet accessible under the old tax regime well beyond the restriction of
Rs. 1,50,000, is secured under section 80CCD(1B). Henceforth, the deduction for
the equivalent isn't accessible under the new tax regime on the off chance that
one picks to pay tax under section 115BAC.
