Standard Deduction For Salaried Class: After the Modi government came to power for the third time, the expectations of the middle class have increased significantly. Experts say that this time the Finance Minister can give relief to the taxpayers in Standard Deduction and NPS.
NPS in Budget 2024: After the Modi government came to power for the third consecutive time, the expectations of individual taxpayers have increased significantly from the full budget to be presented on 23 July 2024. This time the budget is expected to focus on the middle class. In this time’s budget, it is expected that many big announcements can be made by the government to give relief to the National Pension Scheme (NPS) members. In this year’s budget, the tax exemption limit on NPS contribution can be increased to 12 percent, currently it is 10 percent.
Benefit of deduction under old regime
Investment in NPS (National Pension Scheme) gets the benefit of deduction under the old regime of income tax. This is a saving scheme run by the government to provide security in old age. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). The money deposited in it and the interest received on it is tax free. But a little tax is levied while withdrawing the money. Now PFRDA has recommended increasing the tax exemption. The regulator says that in terms of tax, there should be equal opportunities for companies and employers contributing to NPS just like EPFO, currently there is inequality in it.
Facility to deposit up to 10% of salary
Under NPS (National Pension Scheme), salaried class can deposit up to 10% of their salary. Businessmen can deposit up to 20% of their total income. This is a benefit available under Section 80CCD (1) of the Income Tax Act. In the old tax system, it can be combined with the limit of Rs 1.5 lakh available under Section 80C. If you voluntarily deposited in NPS in the old tax regime, you can additionally avail a deduction of up to Rs 50,000 on the amount. This is available under Section 80CCD (1B) of the Income Tax Act.
Two benefits of increasing the limit of NPS
In Budget 2024, the additional deduction of up to Rs 50,000 that salaried taxpayers get for voluntary contribution to NPS is available only under the old tax regime. It is expected that the government will also implement this deduction in the new tax system. There will be two benefits of this. First, taxpayers will be able to get the benefit of additional deduction in the new tax regime as well. Second, that along with the new tax regime, there will be more investment in the retirement scheme.
If the contribution increases, the in-hand salary will be less!
At present, deduction regarding employer’s contribution (maximum 10%) is given under both the old and new tax regimes. The government may consider increasing this limit to 12%. If this happens, it will be like a discount of up to 12% in PF contribution. All salaried class taxpayers can benefit from this. However, due to increased employer contribution, the amount received by the employee may be reduced. Efforts are now being made to make the new tax regime the preferred tax regime. In this, you get a lower tax rate, but for this you have to give up the exemptions on some things.
Consideration on increasing the limit of standard deduction
Apart from this, the government can consider increasing the limit of standard deduction of Rs 50,000 available under the new tax regime to Rs 75,000. This will benefit the salaried class, irrespective of which tax regime they have selected. In view of inflation and rising prices, the government can implement it in Budget 2024. To make the new tax regime more attractive, the government can consider some changes.
