Income Tax Alert: This NPS tax benefit can still be claimed under income tax slabs 2020
Income Tax Slabs: If a taxpayer chooses the new income tax slab 2020, one can claim the income tax benefit under Section 80CCD(2).
Income Tax Calculator: If an earning individual chooses the new income tax slab 2020 proposed in the Budget 2020, one can claim the income tax benefit under Section 80CCD (2) of the income tax act. So, while deciding Income Tax slabs for AY2020-21, one must count the investments being done in the financial year in one's National Pension System (NPS). As per the Finance Bill 2020, if someone wants to switch to new income tax slabs, then he or she will have to forego the income tax benefit under Section 80C, but not under Section 80CCD(2).
"Deduction under sub-section (2) of Section 80CCD (employer contribution on account of the employee in notified pension scheme) and Section 80JJAA (for new employment) can be claimed," says the Finance Bill.
See Zee Business Live TV streaming below:
In case your employer is contributing towards your NPS account, which is mandatory for government employees (except Armed Forces) who joined services after 1st January 2004 and voluntary in case of those working in private sector, a deduction of up to 10 per cent of salary (basic + DA) irrespective of any limit qualifies for income tax deduction under Section 80 CCD(2). For central government employees, the limit is 14% of the salary of central government employees. If their organizations allow, employees can opt to restructure their salary structure to opt for this tax deduction.
However, the income taxpayer should be very clear that if he or she opts for the new tax regime the taxpayer won't be eligible to claim Rs 50,000 deduction under Section 80CCD (1B) for investment in the Tier 1 account of NPS that was available under the existing tax regime.
While presenting the Union Budget 2020 Nirmala Sitharaman had proposed the new income tax slab citing, "I propose to announce no income tax liability for an earning individual on income up to Rs 5 lakh per annum." She said that an income taxpayer earning from Rs 5 lakh to Rs 7.5 lakh will have to pay 10 per cent tax on income. FM announced a new income tax slabs of Zero to Rs 5 lakh, from Rs 5 lakh to Rs 7.5 lakh, from Rs 7.5 lakh to Rs 10 lakh, from Rs 10 lakh to Rs 12.5 lakh, from Rs 12.5 lakh to Rs 15 lakh and a slab for a taxpayer earning above Rs 15 lakh.
Here is the new income tax list of proposed rates to be imposed on an earning individual in budget 2020:
- Zero income tax on up to Rs 5 lakh income tax slab;
- An income taxpayer earning from Rs 5 lakh to 7.5 lakh to pay 10 per cent;
- An income taxpayer earning from Rs 7.5 lakh to Rs 10 lakh to pay 15 per cent;
- An income taxpayer earning from Rs 10 lakh to 12.5 lakh to pay 20 per cent only;
- An income taxpayer earning from Rs 12.5 lakh to Rs 15 lakh to pay 25 per cent income tax; and
- A taxpayer earning above Rs 15 lakh per annum will have to pay 30 per cent of one's income.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.