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How To Take Additional  Deduction of Rs.50,000 Towards NPS 2020

Additional Deduction

Additional Deduction of rs 50,000

In order to take additional tax deduction of rs 50,000 towards NPS under section 80CCD(1B),you should complete your saving of ₹ 150,000 in 80C,then you can take deduction of ₹ 50,000.

Also read: How to calculate income tax for NPS employees

Standard Deduction

Let’s take an example.

Suppose your gross salary for FY 2019-20 is ₹ 7,50,000.And as per income tax act you are alligible to take standard deduction of ₹ 50,000.

So deduct ₹ 50,000 from  7,50,000,Amount will become 7 lakhs.

Alligibility to take ₹ 50,000 deduction

  • Tax payer must be NPS subscriber.
  • Only tier-1 account holders are alligible.
  • Tax payers must exhaust the ₹ 150,000 limit in 80C,only then he/she can take additional deduction.

Section 80CCD(1) Versus 80CCD(1B)

Generally,NPS employees contribute 10% of (Basic pay + DA) to their NPS accounts.

But in case you want to avail additional tax  of ₹ 50,000,you should put your NPS contribution in section 80CCD(1B).

Condition : Here You can only  take additional tax deduction if your saving under 80C is ₹ 150,000.

Steps to take ₹ 50,000 additional Deduction

#1 : In this example we have taken gross income ₹ 7,50,000 .

#2 : Deduct standard deduction of ₹ 50,000.That will become 7,50,000 – 50,000 = 7,00,000.

#3 : So now suppose your saving under section 80C is 150,000,which is maximum allowed.

#4 : Now as your saving under 80C is ₹ 150,000.So you can take ₹ 50,000  deduction under 80CCD(1B).

#5 : Hence you have got total of  ₹ 2 lakhs saving.

#6: So 7 lakhs – 2 Lakhs = 5 lakhs.

#7  Finally your total income is ₹ 5 lakhs.

Conclusion

Thus your tax liability is zero.

Similarly you can calculate your tax liability against different gross income as may be in you case.

But it is crystal clear that if you are an NPS subscriber,you should avail the additional income  deduction of ₹ 50,000 under section 80CCD(1B).

 

Kuldeep Singh
 

is a professional blogger,teacher and income tax expert

Click Here to Leave a Comment Below 2 comments
Jasvir Bawa - January 17, 2020

If there is saving of 130000 Under 80c and annual nps contibution is 70000 than person can take the benefit under 80ccd

Reply
    Kuldeep Singh - January 18, 2020

    No sir,you should complete your 150,000 in 80C first, only then you can consider your amount in 80ccd(1b).

    Reply

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