Income Tax Exemption: 80C.. 80D.. Section 10 13A.. If you still want tax exemption then do this, very few people know this method!

ITR Filing: Maximize Your Tax Savings Before March 31st

The last date for investing to save income tax (Tax Saving Planning) is fast approaching—March 31st. If you want to save tax this year, you must make your investments by this deadline. Otherwise, you will only get tax benefits on investments made in the next financial year. Even if you have utilized all exemptions under 80C, 80D, Section 10, and 13A, you may still have a high tax liability. However, there is a lesser-known way to secure additional exemptions—by contributing to NPS through your employer. Let’s explore how this works.

Most People Get Tax Exemption in NPS Under These Sections

Employees can claim tax exemptions on NPS under Section 80CCD, which is further divided into:

• 80CCD(1): Allows a deduction of up to ₹1.5 lakh (covered under the 80C limit).

• 80CCD(1B): Provides an additional deduction of ₹50,000, bringing the total deduction to ₹2 lakh.

• 80CCD(2): Offers an extra exemption beyond ₹2 lakh for contributions made by the employer.

How to Get Additional Exemption Under 80CCD(2)?

Employers can contribute to your NPS account and get tax benefits by classifying it as a business expense. As an employee, you can receive tax exemptions on this contribution:

• Private sector employees can claim an additional deduction of up to 10% of their basic salary + dearness allowance (DA).

• Government employees can avail this deduction for up to 14% of their basic salary + DA.

What You Need to Do to Avail This Benefit

Most companies offer NPS facilities. You can approach your HR department and request investment in NPS through salary deductions. This will slightly reduce your take-home salary, but in return, you will get additional tax exemptions. If your company does not yet offer NPS, you can suggest it to HR, as it benefits both employees and employers.

Understanding the Benefits With an Example

Consider an individual earning ₹10 lakh per annum. Under the old tax regime:

• They claim ₹1.5 lakh under 80C and ₹50,000 under 80CCD(1B) (NPS).

• Their taxable income is reduced to ₹8 lakh.

• Further deductions like conveyance allowance, internet bills, and meal coupons can lower taxable income to ₹6 lakh.

Final Tax Calculation

• Standard deduction of ₹50,000 applies, reducing taxable income to ₹5.5 lakh.

• If the employee's basic salary is ₹5 lakh, they can invest 10% (₹50,000) in NPS under 80CCD(2).

• This reduces taxable income to ₹5 lakh, qualifying them for a rebate under Section 87A.

• Final tax payable: ₹0!

Conclusion

Investing in NPS through your employer is an excellent way to save additional tax beyond standard deductions. If your company provides this facility, opt for it before March 31st to maximize tax savings and secure a better retirement corpus.