October 26, 2020

Itax Software

Income Tax Software

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.
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.

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)
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.

to Download the Automated All in One TDS on Salary for Govt &
Non-Govt Employees for the Financial Year 2018-19 & Ass Year 2019-20
This Excel Utility can prepare at a time your Tax Computed sheet +
Individual Salary Statement + Individual Salary Structure as per Salary
Pattern of Govt and Non-Govt Concerned + Automated Arrears Relief
Calculation U/s 89(1) with Form 10E from F.Y.2000-2001 to F.Y.2018-19
+Automated Income Tax Form 16 Part A&B and Form 16 Part B for as per
the Finance Budget 2018-19]

Tax Benefit for Compulsory NPS deduction:

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?

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

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