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I believe there is a provision that allows claiming an additional deduction of up to Rs 50,000 from taxable income which is available exclusively on investing in NPS Tier I. Can it be availed by new tax regime followers? - Anonymous
No. That's the short answer.
If you are under the new tax regime and are investing in NPS Tier-1, you are not eligible to get the additional deduction of up to Rs 50,000.
Only those who have opted for the old tax regime can apply for the additional deduction.
However, there's still hope for individuals in the new tax regime. You can claim a tax deduction if your employer is also contributing to your NPS.
But do remember that employers' contribution is tax-free only up to 10 per cent of your Basic Pay and Dearness Allowance. These are two segments that form a part of your CTC.
In case you are a government employee, the tax exemption limit is 14 per cent.
Tax deductions offered by NPS
Benefits under the old vs new tax regime
| Section of the Income Tax Act | How you have invested | Maximum tax exemption limit (Rs) | Available under |
|---|---|---|---|
| 80C | Self, including salary deductions (Employee contribution of the NPS) | 1.5 lakh | Old tax regime |
| 80CCD (1B) | Self Employee contributions through salary deductions can also be a part | 50000 | Old tax regime |
| 80CCD (2) | Salary deductions (Employer's contribution) | 10% of Basic and Dearness Allowance. 14% if you are a government employee | Both old and new tax regime |
Also read: Getting started with NPS
This article was originally published on January 24, 2024.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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