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What Are the NPS Tax Benefits Under the Old and New Tax Regime?

Under the old and new tax regime, NPS offers different tax benefits. Self-contributions to NPS can qualify for deductions under the old regime, while eligible employer contributions can provide tax benefits under the new regime, subject to applicable rules.

Tax Benefits Under the Old Regime

  • Eligible subscribers can claim deductions on NPS contributions under Section 80CCD(1) under the old regime.
  • Deduction is included within the overall ₹1.5 lakh limit under the applicable rules.
  • Salaried employees can claim a deduction (own contribution) of up to 10% of their salary.
  • Self-employed individuals can claim a deduction up to 20% of their gross total income, subject to applicable rules.
  • Subscribers can claim an additional deduction of up to ₹50,000 under Section 80CCD(1B), which is over and above the applicable ₹1.5 lakh limit.

Tax Benefits Under the New Regime

  • Subscribers cannot claim deductions for their own contributions under Sections 80CCD(1) and 80CCD(1B) under the new regime.
  • However, eligible employer contributions to NPS may qualify for a deduction under Section 80CCD(2), subject to applicable conditions.

Corporate NPS Tax Benefit for Salaried Employees

  • Employer contributions to NPS may qualify for a deduction under Section 80CCD(2).
  • Under the new tax regime, the deduction can be up to 14% of salary (Basic + DA), subject to applicable conditions.
  • The combined employer contribution to NPS, EPF and Superannuation Fund is subject to the applicable overall tax limit.

What Should You Remember?

Tax benefits available in NPS depend on tax regime, contribution type, etc. Therefore, it is important to check the applicable rules for the relevant financial year before claiming deductions.

NPS offers tax benefits while also supporting long-term planning for retirement corpus, making it crucial to evaluate both old and new regimes while choosing your retirement investment strategy.

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