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How To Calculate Income Tax For NPS Employees FY 2019-20

How to Calculate Income Tax NPS

How to calculate Income tax for NPS Employees

Today,You will learn how to calculate income tax for NPS employees for FY 2019-20.And NPS employees can take additional ₹ 50,000 deduction besides 150,000 under section 80CCD(1B).

NPS employee’s CPF contribution to NPS comes under section 80CCD(1) of income tax act.And 10% of basic+DA is deductible to NPS.

Key features of Budget 2019

  • Standard Deduction of ₹ 50,000
  • Income tax rebate under section 87A increased from ₹ 2500 to ₹ 12,500.
  • Tax rebate is applicable if total income is less than or equal to 5,00,000.
  • Health education cess is 4% of tax after rebate u/s 87A if applicable.
  • Tax slab rates remain unchanged.

Steps to calculate income tax for NPS employees

Before you calculate your tax ,you must have knowledge about Total Income.

Total income is the income after deducting gross salary from all savings under section 80C to 80U.

Also read : How to calculate income tax for FY 2019-20

Deductions under chapter VIA

Important Note For NPS Employees

Additional Deduction : for fy 2019-20 NPS employees can take additional tax deduction upto of ₹ 50,000.

But you should keep in mind that you should firstly exhaust ₹ 150,000 in 80C and then you can take ₹ 50,000 additionally under section 80CCD(1B).

How To Calculate Income Tax For NPS Salaried Persons

Suppose your gross salary for fy 2019-20 is ₹ 6,50,000.

So deduct standard deduction of ₹ 50,000 from ₹ 6,50,000.

Also suppose your saving under section 80C is ₹ 150,000.

And also let your contribution towards NPS is ₹ 70,000.

Tip : Here you should take additional deduction of ₹ 50,000 (maximum allowed u/s 80CCD(1B) is 50,000) under section 80CCD(1B).

Hence,6,50,000 – 50,000 – 150,000 – 50,000 =4,00,000.

Now as per tax slab rates 0-250,000 = nil tax.

And 250,001- 4,00,000 = @5%.

So in this case, taxable amount is ₹ 150,000.

Hence,5% of 150,000 = ₹ 7,500.

As total income is less than 5 lakhs,so you get the whole amount of ₹ 7,500 as tax rebate under section 87A of income tax act.

Finally your tax liability is zero.

Summary

Finally it is clear that tax payers under NPS can take overall ₹ 250,000 deduction,including additional deduction under section 80CCD(1B).

Despite it,tax payer should keep in mind that as long as your total income is less than or equal to 5 lakhs,your tax liability will be zero.

Tabular view of tax slab rates

Serial numberTotal Income(in rupees)Tax Rate
10-250,000Nill
2250,001-5,00,000@5%
35,00,001-10,00,000@20%
4>10,00,000@30%
Kuldeep Singh
 

is a professional blogger,teacher and income tax expert

Click Here to Leave a Comment Below 4 comments
Sandeep singh - January 6, 2020

I have invested 85000 in ppf. And my NPS is 57000 employee share and 57000 employer share. So is it right to add 85000+57000= 142000 to get rebate under 80C. Then how much extra i will get rebate under 80CCD.

Reply
    Kuldeep Singh - January 8, 2020

    Firsly you should complete ₹150,000 in 80C without NPS,only then you can take additional deduction 80CCD1B.

    Reply
Major Singh - January 5, 2020

If we want benefit of additional 50000 NPS saving then could I open different NPS account or invest extra saving in NPS ?

Reply
    Kuldeep Singh - January 6, 2020

    No,you can only take additional tax deduction for your tier-1 account only.

    Reply

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