I got a message from NSDL saying that I can save extra ₹50,000 rupees in addition to ₹1.5 lakh under Section 80C. I am a central government employee. My NPS contribution is around 70,000 annually. An equal amount is contributed by my employer. My question is that if I save ₹1.5 lakh in PPF under Section 80C, will I get additional tax benefit of ₹50,000 on NPS contribution?
- Mukesh Sah
Yes, one can contribute ₹1.5 lakh to Public Provident Fund (PPF) and claim tax deduction under Section 80C and claim extra tax deduction of ₹50,000 exclusively for contribution to National Pension Scheme (NPS) under Section 80CCD(1B). Section 80CCD provides tax deduction on contributions to NPS. A new sub-section 1B was added to Section 80CCD in the last budget and it allows an additional tax deduction of up to ₹50,000 on contributions to NPS. However, the total tax deduction one can claim under Section 80C and Section 80CCD is ₹2 lakh.
Since you are a central government employee, you have to make a mandatory contribution to NPS, which is matched by your employer. In your case, your total contribution to NPS would be around ₹1.4 lakh (₹70,000 by you and ₹70,000 your employer). That means you can only save extra ₹60,000, as the total tax deduction cannot exceed ₹2 lakh under both Section 80C and 80CCD.
This article was originally published on November 19, 2015.
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