Opted for new tax regime? You can still avail this income tax deduction to save tax - The Financial Express

Opted for new tax regime? You can still avail this income tax deduction to save tax – The Financial Express

The Financial Express

If you have opted for the new tax regime as against the old tax regime, you can still avail an income tax deduction to save taxes. Remember, under the new tax regime, taxpayers can avail the lower tax rates but are not allowed to avail most of the income tax exemptions and deductions such as section 80C or Section 80 D tax benefits. However, the deduction under Section 80CCD(2) of the Income Tax Act, 1961 may still be availed by taxpayers even after opting for the new tax regime.
When an employer contributes towards your National Pension System (NPS) account, the tax benefit can be availed under Section 80CCD(2) even after opting for the new tax regime. The tax benefit of Section 80CCD(2) is available only to those who are working and earning a salary income and not to a non-salaried individual.
Importantly, the Deduction under section 80CCD(2) on account of the contribution made by the employer to a pension scheme is not subject to a ceiling limit of Rs. 1.5 lakh as provided under section 80CCE that includes the limit of Section 80C.
The most important aspect of Section 80CCD(2) deduction is that it pertains to payments made by an employer to an employee’s NPS account. This means, the contributions made by an employee does not qualify for tax benefit under this section. Section 80CCD(2) pertains to contributions made by the employer into the employee’s account of a notified pension plan such as NPS.
This also means, not all employees could be in a position to make use of Section 80CCD(2). If your employer is contributing towards your NPS account, you may show the amount of contribution in your income tax return and bring down the tax liability. Employees may approach their employer to restructure their salary package and even ask the employer at the time of increment to do so.
The maximum deduction that can be availed by the employee is restricted to 14 per cent of salary in case of central government employees and 10 per cent for any other employee. So, if the annual basic salary of the employee is Rs 5 lakh, one can avail a deduction of up to Rs 50,000 if the employer contributes towards employees NPS account.
Going forward, if the new tax regime becomes the norm, as an employee making use of Section 80CCD(2) may help them save taxes.
Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.


Leave a Reply

Scroll to Top
%d bloggers like this: