Earnings Tax Act permits tax advantages as much as Rs 2 lakh on NPS contributions: Know the eligibility
The Earnings Tax Act permits people contributing to Tier-1 Accounts of Nationwide Pension System to assert mixed deductions as much as Rs 2 lakh underneath totally different sections – as much as Rs 1.5 lakh u/s 80CCD(1) and as much as Rs 50,000 u/s 80CCD(1B).
Whereas there isn’t any restrict or restrictions on making quantity of voluntary NPS contributions to assert tax advantages as much as Rs 50,000 u/s 80CCD(1B), a person has to meet some situations to assert tax advantages of as much as Rs 1.5 lakh u/s 80CCD(1).
Tax Advantages for Salaried People
The NPS was first launched as defined-contribution New Pension Scheme in January 2004 to exchange the defined-benefit Previous Pension Scheme for presidency staff, who joined their companies after December 31, 2003.
So, the NPS has been launched primarily to offer pension to authorities staff, the advantage of which was additionally prolonged to others from the 12 months 2009.
Based on Part 80CCD(1) of the Earnings Tax Act, salaried people with obligatory deductions of NPS contributions from their wage might get tax advantages as much as 10 per cent of their month-to-month wage (Fundamental + DA).
Nationwide Pension System: What occurs to your pension if no NPS annuity supplier is chosen?
So, for instance, a salaried particular person having month-to-month wage (Fundamental + DA) of Rs 80,000 might get tax profit as much as Rs 8,000 per thirty days or Rs 96,000 in a 12 months on obligatory contribution to Tier 1 Account of NPS.
The person might also get additional tax profit as much as Rs 50,000 u/s 80CCD(1B) by making a voluntary contribution to Tier 1 Account of NPS.
Tax Advantages for Non-Salaried People
Non-salaried people – like self-employed, skilled, landlord, housewife, traders having curiosity, dividend revenue and so forth – might contribute as much as 20 per cent of their gross annual revenue in Tier-1 Account of NPS to avail tax advantages as much as Rs 1.5 lakh u/s 80CCD(1).
Such people might also get extra tax profit as much as Rs 50,000 u/s 80CCD(1B) by making a voluntary contribution to Tier 1 Account of NPS.
So, for instance, a housewife having gross rental and curiosity revenue of Rs 10 lakh might contribute Rs 2 lakh to Tier-1 Account of NPS and will declare tax good thing about Rs 1.5 u/s 80CCD(1) and extra good thing about Rs 50,000 u/s 80CCD(1B).
However what paperwork do the housewife want to keep up as a proof of gross annual revenue?
“The quantity of revenue declared within the Earnings Tax Return (ITR) is ample,” mentioned CA Karan Batra, Founder and CEO, CharteredClub.com.
#Earnings #Tax #Act #tax #advantages #lakh #NPS #contributions #eligibility