Automated Income Tax Arrears Relief Calculator U/s 89(1) with Form 10E from the F.Y.2000-01 to F.Y.2020-21 With NPS Tax Benefits F.Y. 2020-21 Sec.80CCD(1), 80CCD(2) and 80CCD(1B)

Post Budget 2020, what are the NPS Tax Benefits 2020 under Sec.80CCD(1), 80CCD(2) and 80CCD(1B) and particularly on the off chance that you picked the new tax regime? Let us understand the adjustments in detail.

Every one of you realizes that during the Budget 2020, the Government presented the new tax regime. Likewise, the Government gave you an alternative to pick either the old tax regime or the new tax regime.

In any case, in the event that you attempt to pick the new tax regime, at that point you need to overlook certain findings and exclusions. I have composed presents related to Budget 2020 and the adjustments in your tax rules in different posts and posting equivalent to underneath:-

In view of these changes, a considerable lot of us have disarray about what will be the NPS Tax Benefits 2020? Regardless of whether one can profit the tax benefits as we used to benefit up to FY 2019-20.

NPS Income Tax Benefits 2020 – Sec.80CCD(1), 80CCD(2) and 80CCD(1B)

Presently let us understand the different taxation issues regarding NPS.

NPS Tax Benefits while contributing

To begin with, let us understand the NPS Tax benefits you will get at the hour of contributing. Because of Budget 2020, here the huge changes occurred and consequently let us understand what are the tax benefits in the event that you decided on an old tax regime and imagine a scenario in which you settled on the new tax regime.

a) NPS Income Tax Benefits 2020 under the old tax regime or Old Tax System

On the off chance that you wish to hold the old tax the regime for your IT return documents, at that point the old taxation rules concerning NPS will proceed obviously.

I attempted to clarify the equivalent from the beneath picture. Recollect that tax benefits under Tier 1 and Tier 2 are not accessible for all financial specialists. Tier 2 tax benefits are accessible just for Government Workers. (Allude the post identified with the distinction between Tier 1 and Tier 2 of NPS at "Contrast between Tier 1 and Tier 2 Record in NPS". For other people, there are no tax benefits in the event that you put resources into Tier 2 Record of NPS.

 Breaking point on manager commitment in NPS because of Budget 2020

Likewise, if your boss commitment under Sec.80CCD(2) is more than Rs.Rs.7,50,000 every year (alongside EPF and Superannuation), at that point such surpassed commitment will be taxable salary in the possession of the representative.

Truth be told, even the profits on such surpassing the measure of Rs.7,50,000 (from NPS, EPF, and Superannuation) will be taxable every year.

NPS Tax Benefit 2020 for Tier 2 Record under the new tax regime

Prior there was no annual tax benefit on the off the chance that you put resources into Tier 2 Record. Be that as it may, because of the Government of India changed guidelines, in the event that Focal Government Worker contributes towards Tier 2 Record, at that point he can guarantee the tax benefits under Sec.80C (Consolidated most extreme cutoff under Sec.80C will be Rs.1.5 lakh As it were). Additionally, on the off chance that somebody profited such tax benefits, at that point the put-away cash will be bolted for a long time (precisely like ELSS Common Assets).

Nonetheless, under the new tax regime, you are not qualified for tax conclusion under Sec.80C, there is no tax benefit in the the event that you put resources into NPS Tier 2 Record.

NPS Taxation in case of the demise of the endorser

For Government Representatives Chosen one will be permitted to pull back just 20% single amount. The candidate must buy the annuity from the staying 80%. Be that as it may, in the event that the collected corpus is not exactly or equivalent to Rs.2,00,000 then his life partner (or candidate) can pull back all the sum on the double with no compulsory.

For others-Chosen, one will be permitted to pull back 100% collected corpus. In any case, the chosen one has a decision to purchase an annuity as well.

The singular amount withdrawal by the candidate will be excluded from Personal Tax. On the off chance that the candidate settled on purchasing an annuity, at that point annuity salary will be taxed according to chosen one's personal tax chunk in the time of receipt.

Download Auto Calculate Income Tax Arrears Relief Calculator U/s 89(1)with Form 10E from the F.Y.2000-01 to F.Y.2020-21 (Updated Version)

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NPS Tax Benefit u/s 80CCD(1), 80CCD(2) and 80CCD(1B),With Automated All in One TDS on Salary for Govt & Non-Govt employees for F.Y.2018-19

Tax Benefit on NPS Tier 1 and/or 2?

NPS has two Tiers – 1 and 2.

NPS Tier 1 is the long-term investment, which has restricted withdrawals and meant primarily for retirement planning. On maturity, you can withdraw a maximum of 60% of the corpus as lump sum and rest has to be used for annuity purchase.

NPS Tier 2 is for managing short to medium term investment. You can invest and withdraw anytime as per your wish. This is an optional feature and you are asked if you need Tier 2 account while opening NPS.

All the tax benefit related to NPS is available to invest in NPS Tier 1 account only.

NPS Tax Benefits:

NPS tax benefits are available through 3 sections – 80CCD(1), 80CCD(2) and 80CCD(1B). We discuss each below:

1. Section 80CCD(1)

Employee contribution up to 10% of basic salary and dearness allowance (DA) up to 1.5 lakh is eligible for tax deduction. [This contribution along with Sec 80C has 1.5 Lakh investment limit for tax deduction]. Self-employed can also claim this tax benefit. However, the limit is 10% of their annual income up to a maximum of Rs 1.5 Lakhs.

2. Section 80CCD(1B)

Additional exemption up to Rs 50,000 in NPS is eligible for income tax deduction. This was introduced in Budget 2015.

3. Section 80CCD(2)

Employer’s contribution up to 10% of basic plus DA is eligible for deduction under this section above the Rs 1.5 lakh limit in Sec 80CCD(1). This is also beneficial for the employer as it can claim tax benefit for its contribution by showing it as a business expense in the profit and loss account. Self-employed cannot claim this tax benefit.

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Tax Benefit for Compulsory NPS deduction:

The earlier pension structure was replaced by NPS in most central and state government jobs since 2004. So anyone who joined after that has a compulsory deduction for NPS. The deduction is 10% of basic salary and dearness allowance (DA) and the employer to contributes the matching amount. The confusion for most employees is how they take tax benefit on their compulsory NPS deduction?

The employee has a choice as to which section [80CCD(1) or 80CCD(1B)] he wants to show his contribution.  Ideally he should show Rs 50,000 investment in NPS u/s 80CCD(1B). The tax deduction on rest Rs 12,000 can be claimed u/s 80CCD(1). The section 80CCD(1) along with Section 80C has investment limit eligible for tax deduction as Rs 1.5 lakhs. So he should make an additional investment of Rs 1,38,000 in Section 80C to save maximum tax. In all, he can save Rs 2 lakhs tax u/s 80C and 80CCD(1B).

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Automated TDS on Salary All in One for Assam State Govt Employees for F.Y.2017-18 with NPS Tax Benefits – Sec.80CCD(1), 80CCD(2) and 80CCD(1B)

There is so much confusion about NPS Tax Benefits after the 2016 Budget. Hence, in this post let us discuss about NPS Tax Benefits under sections 80CCD(1), 80CCD(2) and 80CCD(1B) and how to claim additional tax benefits.

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We know that everybody discusses NPS tax benefits during investment. But hardly few know about the taxation part when you start to withdraw. If you know the taxation issue while your retirement, then surely you stay away from NPS investment.

Hence, in this post, I will try to explain the tax benefits during investing and also at the time of retirement.

NPS Tax Benefits while investing

First, let us understand the NPS tax benefits while investing.  I tried to explain the same from below image. Remember that all tax benefits while investing are only for Tier 1 NPS account (Refer the post related to the difference between Tier 1 and Tier 2 of NPS at “Difference between Tier 1 and Tier 2 Account in NPS“. There is no tax benefit for the investment you do in Tier 2 NPS account.

Let us discuss one by one as below.

NPS Tax Benefits under Sec.80CCD (1)

• The maximum benefit available is Rs.1.5 lakh (including Sec.80C limit).
• An individual’s maximum 20% of annual income (Earlier it was 10% but after Budget 2017, it increased to 20%) or an employee's (10% of Basic +DA) contribution will be eligible for deduction.
• As I said above, this section will form the part of Sec.80C limit.

NPS Tax Benefits under Sec.80CCD (2)

• There is a misconception among many that there is no upper limit for this section. However, the limit is least of 3 conditions. 1) Amount contributed by an employer, 2) 10% of Basic +DA and 3) Gross Total Income.
• This is additional deduction which will not form the part of Sec.80C limit.
• The deduction under this section will not be eligible for self-employed.

NPS Tax Benefits under Sec.80CCD (1B)

• This is the additional tax benefit of up to Rs.50,000 eligible for income tax deduction and was introduced in the Budget 2015
• Introduced in Budget 2015. One can avail the benefit of this Sect.80CCD (1B) from FY 2015-16.
• Both self-employed and employees are eligible for availing this deduction.
• This is over and above Sec.80CCD (1).

How much maximum NPS Tax Benefits available while investing?

For Self-Employed

The maximum benefit you can avail under Sec.80CCD (1) is Rs.1,50,000 (including Sec.80C limit). Along with this Rs.50,000 under Sec.80CCD (1B). So total maximum benefit an individual can avail is Rs.2 lakh (where Rs.1.5 lakh will be part of Sec.80C limit).

Even though on paper it looks like maximum benefit available will be Rs.2 lakh. But under Sec.80C, you will have a lot of choices and few default options to save (like life insurance premium or PPF). Hence, never be in wrong belief that NPS will ALONE give you Rs.2 lakh tax benefit.

For salaried benefits.

You can avail the tax benefit under Sec.80CCD (1)+Sec.80CCD (1B) up to Rs.2 lakh. Along with that, you have another additional option to claim deduction under Sec.80CCD (2), which is unlimited and based on certain conditions. I explained the same in my above post.

NPS taxation while withdrawing or maturity

NPS Taxation on retirement

Let us say you accumulated Rs.100 at retirement. In that, you are eligible to withdraw Rs.60 or 60% of such accumulated corpus. Remaining Rs.40 or 40% need to be purchased an annuity product.

In the lump sum withdrawal of Rs.60 or 60%, Rs.40 or 40% is tax-free. Remaining Rs.20 or 20% is taxable income in the year of withdrawal.

The income from an annuity will be taxed year on year as per your tax slab. So you are deferring the tax treatment for future years from the 40% annuity you will buy.

Note-As per Budget 2017, the subscriber whose NPS account is at least 10 years old will be eligible for withdrawing 25% of his/her contributions (without accrued income earned thereon). This 25% withdrawal will be part of total 40% withdrawal (which is tax-free).

NPS Taxation on Pre-mature withdrawal

In this case, you are allowed to buy an annuity product from the 80% of accumulated corpus. So there is no confusion here as the annuity will be taxable income for you year on year.

The confusion is about 20% lump sum withdrawal. IT Department needs to come out with clarity. The rules just say 40% of lump sum withdrawal from NPS is tax-free. However, in this particular case, the lump sum investment is 20%.

Hence, whether the whole 20% is tax-free (as it is less than 40% tax-free limit) or 40% of 20% is only tax-free (i.e. 8% from 20%). As of now, there is no clarity on this aspect.

NPS Taxation on Partial withdrawal

Partial withdrawal from NPS is allowed on certain conditions. I explained the same in my post “National Pension System (NPS)-New Partial Withdrawal and Exit Rules“.

There is no clarity about the tax treatment relating to this partial withdrawal. However, I feel such partial withdrawal will be taxed in the year of withdrawal as per subscriber’s income tax slab.

NPS Taxation in the event of death of subscriber

For Government, Employees-Nominee will be allowed to withdraw only 20% lump sum. The nominee must purchase the annuity from remaining 80%. However, in case the accumulated corpus is less than or equal to Rs.2,00,000 then his spouse (or nominee) can withdraw all the amount at once without any mandatory.

For others-Nominee will be allowed to withdraw 100% accumulated corpus. However, the nominee has a choice to buy an annuity too.

The lump sum withdrawal by the nominee will be exempt from Income Tax. If the nominee opted for buying an annuity, then annuity income will be taxed as per nominee’s income tax slab in the year of receipt.

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Prepare at a time 50 or 100 employees automated Income Tax Master of Form 16 Part B for F.Y.2016-17Investments Qualifying for deduction under section

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Provident Fund (PF) & Voluntary Provident Fund (VPF): PF is automatically deducted from your salary. Both you and your employer contribute to it. While employer’s contribution is exempt from tax, your contribution (i.e., employee’s contribution) is counted towards section 80C investments. You also have the option to contribute additional amounts through voluntary contributions (VPF). The current rate of interest is 8.5% per annum (p.a.) and is tax-free. Must Read-EPF Act 1952 vis-á-vis Income Tax Act – Tax Treatment of PF Dues 

Public Provident Fund (PPF): Among all the assured returns small saving schemes, Public Provident Fund (PPF) is one of the best. The current rate of interest is 8.70% tax-free (Compounded Yearly) and the normal maturity period is 15 years. The minimum amount of contribution is Rs 500 and maximum is Rs 1,50,000. A point worth noting is that interest rate is assured but not fixed. Read more- All about PPF and Income tax benefit

Life Insurance Premiums: Any amount that you pay towards life insurance premium for yourself, your spouse or your children can also be included in Section 80C deduction. Please note that life insurance premium paid by you for your parents (father/mother / both) or your in-laws are not eligible for deduction under section 80C. If you are paying the premium for more than one insurance policy, all the premiums can be included. It is not necessary to have the insurance policy from Life Insurance Corporation (LIC) – even insurance bought from private players can be considered here.  Read More-Life Insurance Premium- Tax benefit on Payment and Maturity 

Equity Linked Savings Scheme (ELSS): There is some mutual fund (MF) schemes specially created for offering you tax savings, and these are called Equity Linked Savings Scheme, or ELSS. The investments that you make in ELSS are eligible for deduction under Sec 80C. Read More-Section 80C – Investment in Equity Linked Savings Scheme (ELSS) 

Home Loan Principal Repayment: The Equated Monthly Installment (EMI) that you pay every month to repay your home loan consists of two components – Principal and Interest.The principal component of the EMI qualifies for deduction under Sec 80C. Even the interest component can save you significant income tax – but that would be under Section 24 of the Income Tax Act. Please read “Income Tax (IT) Benefits of a Home Loan / Housing Loan / Mortgage”, which presents a full analysis of how you can save income tax through a home loan.-Income Tax Benefits from House Property and Loan

Stamp Duty and Registration Charges for a home: The amount you pay as stamp duty when you buy a house, and the amount you pay for the registration of the documents of the house can be claimed as the deduction under section 80C in the year of purchase of the house.

Sukanya Samriddhi Account: Sukanya Samridhi Account’ can be opened at any time from the birth of a girl child till she attains the age of 10 years, with a minimum deposit of Rs 1000. A maximum of Rs 1.5 lakh can be deposited during the financial year. Interest on this account is fully exempt from tax in the year of accrual as well as in the year of receipt. Sukanya Samriddhi Account meaning Girl Child Prosperity Scheme is a special deposit scheme launched by Prime Minister Narendra Modi on 22 January 2015 for a girl child. The scheme of Sukanya Samriddhi Account came into effect via notification of Ministry of Finance. The notification details are Notification No. G.S.R.863(E) Dated 02.12.2014. The scheme will be governed by ‘Sukanya Samriddhi Account Rules, 2014’.

National Savings Certificate (NSC) (VIII Issue): 

NSC is a time-tested tax saving instrument with a maturity period of  Five and Ten Years. Presently, the interest is paid @ 8.50% p.a. on 5 year NSC and 8.80 % Per Annum on 10 years NSC.  Interest is Compounded Half Yearly. While the minimum investment amount is Rs 100, there is no maximum amount. Premature withdrawals are permitted only in specific circumstances such as a death of the holder. Investments in NSC are eligible for a deduction of up to Rs 150,000 p.a. under Section 80C. Furthermore, the accrued interest which is deemed to be reinvested qualifies for deduction under Section 80C. However, the interest income is chargeable to tax in the year in which it accrues.

Infrastructure Bonds: These are also popularly called Infra Bonds. These are issued by infrastructure companies and not the government. The amount that you invest in these bonds can also be included in Sec 80C deductions.

Pension Funds – Section 80CCC: This section – Sec 80CCC – stipulates that an investment in pension funds is eligible for deduction from your income. Section 80CCC investment limit is clubbed with the limit of Section 80C – it means that the total deduction available for 80CCC and 80C is Rs. 1.50 Lakh. This also means that your investment in pension funds up to Rs. 1.50 Lakh can be claimed as deduction u/s 80CCC. However, as mentioned earlier, the total deduction u/s 80C and 80CCC can not exceed Rs. 1.50 Lakh.

5-Yr bank fixed deposits (FDs): Tax-saving fixed deposits (FDs) of scheduled banks with tenure of 5 years are also entitled to section 80C deduction.

Senior Citizen Savings Scheme 2004 (SCSS): A recent addition to section 80C list, Senior Citizen Savings Scheme (SCSS) is the most lucrative scheme among all the small savings schemes but is meant only for senior citizens. Interest Senior Citizen Savings Scheme 2004 is payable quarterly instead of compounded quarterly. Thus, unclaimed interest on these deposits won’t earn any further interest. Interest income is chargeable to tax. The account may be opened by an individual,

1. Who has attained an age of 60 years or above on the date of opening of the account?
2. Who has attained the age 55 years or more but less than 60 years and has retired under a Voluntary Retirement Scheme or a Special Voluntary Retirement Scheme on the date of opening of the account within three months from the date of retirement.
3. No age limit for the retired personnel of Defence services provided they fulfill other specified conditions.

5-Yr post office time deposit (POTD) scheme: POTDs are similar to bank fixed deposits. Although available for varying time duration like one year, two years, three years and five years, only 5-Yr post office time deposit (POTD) – which currently offers 8.50 per cent rate of interest –qualifies for tax saving under section 80C. Interest is compounded quarterly but paid annually. The Interest is entirely taxable.

NABARD rural bonds: There are two types of Bonds issued by NABARD (National Bank for Agriculture and Rural Development): NABARD Rural Bonds and Bhavishya Nirman Bonds (BNB). Out of these two, only NABARD Rural Bonds qualify under section 80C.

Unit linked Insurance Plan: ULIP stands for Unit linked Saving Schemes. ULIPs cover Life insurance with benefits of equity investments.They have attracted the attention of investors and tax-savers not only because they help us save tax but they also perform well to give decent returns in the long-term.

Others: Apart from the major avenues listed above, there are some other things, like children’s education expense (for which you need receipts), that can be claimed as deductions under Section 80C.

So, where should you invest?

Like most other things in personal finance, the answer varies from person to person. But the following can be the broad principles:

Provident Fund: This is deducted compulsorily, and there is no running away from it! So, this has to be the first. Also, apart from saving tax now, it builds a long-term, tax-free retirement corpus for you.

Home Loan Principal: If you are paying the EMI for a home loan, this one is automatic too! So, it comes as a close second.

Life Insurance Premiums: Every earning person having dependents should have adequate life insurance coverage. (For more on this, please read “Life after life – Why you should buy Life Insurance”) Therefore, life insurance premium payments are the next.

Voluntary Provident Fund (VPF) / Public Provident Fund (PPF): If you think that the PF being deducted from your salary is not enough, you should invest some more in VPF, or in PPF.

Equity Linked Savings Scheme (ELSS): After the above, if you have not reached the limit of Rs. 1,50,000, then you should invest the remaining amount in Equity Linked Savings Scheme (ELSS).

Equities provide the best, inflation-beating return in the long term, and should be a part of everyone’s portfolio. After all, what can be better than something that gives a great return and helps save tax at the same time?

When to Invest for 80C deduction?

Many of us start looking for investment avenues only in February or March, just before the Financial Year is getting over. This is a big mistake! One, you would end up investing your money without putting proper thought to it. And secondly, you would end up losing the interest/appreciation for the whole year. Instead, decide where you want to make the investments, and start investing right from the beginning of the financial year – from April. This way, you would not only make informed decisions but would also earn the interest for the full year from April to March.

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Tax Planning Tips for A.Y. 2018-19,Plus Automated Income Tax Preparation Excel Based Software all in One TDS on Salary for F.Y.2017-18

Tax planning has always been the test of efficiency for people along with being a test of their cunningness such that they can save their taxes in a lawful manner. Here are some of the tips that can help you to plan your taxes for the F.Y. 2017-18 & A.Y. 2018-19.

1) Invest in policies U/S 80C

Policies are a prominent way to save a handful amount of tax. Up to Rs. 1, 50, 000 (A.Y.2018-19) can be saved by way of investing PPF, EPF, Fixed Deposit for 5 years, Pension Plans, etc. as specified u/s 80C, 80CCC and 80CCD.

2) Divide Income to various family members

Avail the basic exemption limit of Rs. 2.5 Lakh (A.Y.2018-19) in the various family members as possible. Prefer senior citizens like parents and women as then can avail higher exemption limit.

3) Contribute to NPS U/S 80CC

NPS stands for New Pension Scheme was has recently been initiated by the Government under which investors can claim a deduction as a have a Tax free NPS return, however, withdrawal under such system is till taxable.

4) The aid of Medical Insurance U/S 80D

A deduction of Rs. 25, 000 is available for people who wish to invest in medical insurance for self. This deduction increases to Rs. 30, 000 when it is done by senior citizens. More about medical insurance deduction

5) Expenditure towards disabled dependent U/S 80DD

When a certain amount is spent inform medical insurance for a disabled dependent, the deduction up to Rs. 75, 000 is available where the disablement is normal in nature. The same can be extended up to 1,25,000 is the disablement is of the severe type. More about deduction u/s 80DD

7) Repayment of Higher Education Loan U/S 80E

When repayment is carried out for higher education loan, the same is also allowed as a deduction and hence can reduce ample amount of tax liability.  More about Deduction 80E: Interest on Loan Taken for Higher Education

·                          Download Automated All in One TDS on Salary for Non-Govt Employees for F.Y.2017-18

·                          Download Automated All in One TDS on Salary for Govt. & Non – Govt. Employees for F.Y.2017-18

·                          Download Automated All in One TDS on Salary for Central & All State Employees for F.Y.2017-18

8) Donate U/s 80G

Donation to charitable trusts and organizations have always been regarded as an auspicious event, therefore, 100% deduction is available in such context. The same rate is also applicable in a situation where contribution is made to a political party.

9) House loan interest U/s 24B

People who are liable to pay house loan interest can also claim deduction up to Rs. 2, 00, 000 (the figure represents the maximum investment limit)

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