National Pension System (NPS) is very helpful in tax savings. It is especially beneficial for working people using the new tax regime. Employees get tax deduction on contribution up to 14% of basic salary (plus DA) in this scheme
Finance Minister Nirmala Sitharaman announced tax-free income up to Rs 12 lakh per annum in the Union Budget 2025. This has brought a lot of relief to the middle class. Now people with an annual income of up to Rs 12 lakh will have more money in their hands. People will be able to use this money for expenses, savings and investment. The Finance Minister has also changed the tax slab in the new regime. Due to this, people with an income of more than Rs 12 lakh will also have to pay less tax than before.
You will have to invest in NPS
Tax experts say that if a person is employed, his tax can be zero on income up to Rs 13.7 lakh per annum. For this, investment will have to be made in the National Pension System ( NPS ). In the new regime of Income Tax , tax deduction is available on NPS contribution up to 14% of the basic salary (plus DA). This deduction is available under Income Tax Ex Tech Section 80CCD (2). However, this deduction is available only when the employer provides the facility of investing in NPS to the employee.
This way the tax will become zero
Suppose a person’s annual income is Rs 13.7 lakh. If his basic salary is assumed to be 50 percent, then it will be Rs 6.85 lakh. 14 percent of this will be Rs 95,900. The employee can claim tax deduction on the annual contribution of Rs 95,900 to NPS. If the standard deduction of Rs 75,000 is added to this amount, then the total deduction will be Rs 1,70,900. In this way, he will not have to pay any tax.
NPS was started in 2004
The government started NPS in 2004. It was opened for common people in 2009. This is the best scheme for retirement savings. When a person turns 60 years old, 60 percent of the funds deposited in NPS are received as a lump sum. There is no tax on this. The remaining 40 percent of the money has to be invested in annuity. This gives the person a pension every month. The return of NPS is good. It has the option of market linked investment. This increases the money significantly in the long term.
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