Section 80C explained: Did you
realize that Section 80C, under the
Income Tax Act 1961, encourages you to lessen the tax trouble by allowing a
deduction from the total taxable income
in a financial year? Section 80C is a popular decision in the event that you
want an answer to the inquiry: How might I save tax on salary?
Showing posts with label Income Tax Section 80CCD(1). Show all posts
Showing posts with label Income Tax Section 80CCD(1). Show all posts
Friday, 11 September 2020
Wednesday, 23 January 2019
Budget 2015 provided for additional exemption of Rs 50,000 for investing in NPS (National Pension Scheme) Tier 1 account u/s 80CCD(1B). This was to encourage NPS as a popular retirement planning option. And we all know anything related to tax saving automatically becomes a popular investment avenue. In an earlier post we had highlighted why you should invest in equity mutual funds than NPS, but still, I got people who were interested in opening NPS account and take advantage of Section 80CCD(1B).
Eligibility for NPS Account:
NPS account can be opened by anyone with age between 18 to 60 years. Even NRIs are eligible to open NPS accounts. NRIs can invest through normal banking channels or out of funds held in their NRE/FCNR/NRO account.
NPS Account Tiers:
NPS has two tiers.
1. Tier -I account is the primary account and the contribution to this account is locked till retirement.
2. Tier- II account is optional saving account and deposit and withdrawal to this account can be done anytime.
Type of NPS Account:
There are 4 types of account depending on the type of subscriber.
1. Government Sector – this account is opened for Government employees by their respective employers
2. Corporate Sector – this account is opened for Private Sector employees by their respective employers
3. All Citizen Model – for all citizens who are not covered in the above two categories
4. NPS Lite / Swavalamban – this is Government sponsored NPS scheme with some subsidy from the government
How to open the NPS Account?
The good news is opening NPS account is relatively simple. You can download the NPS application form by clicking here.
After filling the form you can submit it to your nearest Point Of Presence – Service Provider (POP-SP) along with your PAN card, address proof, canceled cheque, and the cheque for initial deposit.
How to fill NPS Account Opening Form?
The NPS account opening form is a 4-page simple form. The first page asks for Personal Details, Address, contact details, and bank details.
Page 2 has nomination details, NPS option, Pension Fund Selection and investment option selection.
Page 3 is just KYC verification by POP-SP.
Page 4 is the instruction page.
Select your Pension Fund
There are a total of 7 pension fund managers
1. LIC Pension Fund Limited
2. SBI Pension Funds Private Limited
3. UTI Retirement Solutions Limited
4. ICICI Prudential Pension Funds Management Company Limited
5. Kotak Mahindra Pension Fund Limited
6. Reliance Capital Pension Fund Limited
7. HDFC Pension Management Company Limited
Out of the above 7 only LIC, SBI and UTI are available for Government employees while all 7 are available for all other NPS accounts.
Asset Investment Options:
There are 3 types of assets you can invest in.
1. Asset Class E– Investment in predominantly equity market instrument.
2. Asset Class C-Investment in fixed income instruments other than Government Securities
3. Asset Class G– Investment in Government Securities/Bonds
Active Vs Auto Choice:
You need to select between active and auto investment choice.
Active Choice – in this case, you can select the allocation between the above 3 asset classes. You can invest a maximum of 50% in Asset Class E.
Auto Choice – in the case of auto choice the allocation between assets happen based on the age of the subscriber. Till the age of 35 years, the allocation is 50% in Class E, 30% in Class C and 20% in Class G. every year the asset distribution is changed such that Class E is reduced by 2%, Class C reduced by 1% and Class G increased by 3%. At the age of 55, there is only 10% invested in Class E and C each and rest 80% is in Class G. The above asset distribution is done to keep the volatility to the minimum as the subscriber reaches withdrawal stage.
Download Automated Income Tax Arrears Relief Calculator U/s 89(1) with Form 10 E from the Financial Year 2000-01 to Financial Year 2018-19
How to Open NPS Account Online?
You can also open NPS account online if you have internet banking enabled for any of the 10 participating banks – Allahabad Bank, Bank of India, Bank of Maharashtra, Oriental Bank of Commerce, South Indian Bank, State Bank of Travancore, State Bank of Hyderabad, State Bank of Patiala, Tamilnadu Mercantile Bank and United Bank of India
Just go to e-NPS website, fill up the form and make the initial contribution.
Next, take a printout of the form, paste your photograph (do NOT sign across the photograph) & affix the signature. The form should be sent within 90 days from the date of allotment of PRAN to CRA at the following address:
Central Recordkeeping Agency (eNPS)
NSDL e-Governance Infrastructure Limited,
1st Floor, Times Tower
Kamala Mills Compound, Senapati Bapat Marg,
What after NPS Form Submission?
On submission of NPS form, a 17 digit Permanent Retirement Account Number (PRAN) will be allotted to you. Within 2-3 weeks you would get a welcome kit containing a PRAN Card, IPIN/TPIN, Subscriber Master Report, Scheme Information Booklet along with a Welcome Letter through the post.
Subsequent Contributions:
All the active NPS account holders can do subsequent contributions online. For every contribution, you need to authenticate PRAN using the OTP sent on the registered mobile number. Next, you can pay using your debit card or internet banking.
Investment Limit in NPS:
The initial contribution has to be made at the time of submitting the form at the POP-SP. The initial contribution should be minimum Rs 500 for Tier-I account and Rs 1,000 for Tier-II account.
Thereafter you should contribute at least once every year in both Tier-I and Tier-II (if opened) account. The minimum contribution should be rs 500 for Tier-I account and Rs 250 for Tier-II account.
Overall the minimum contribution should be Rs 6,000 for Tier-I account and there is no maximum investment limit. The minimum balance for Tier-II account should be at least Rs 2,000 at the end of each financial year.
There is no limit to the number of times you can make a deposit.
The penalty for not making minimum Contribution:
If the subscriber fails to make the above minimum contribution, a default penalty of Rs. 100 per year of default is levied and the account would become dormant. In order to reactivate the account, the subscriber would have to submit form Form UOS-S10 pay the minimum contributions (Rs 500), along with penalty (Rs 100), due for the period of dormancy. The dormant account will be closed if the account value falls to zero.
Charges for NPS:
NPS charges can be classified into 4 headers:
1. Point of presence (PoP) charges
2. Central record-keeping agency (CRA) charges
3. Pension fund management charges and
4. Custodian charges
NPS Tax Benefits:
NPS Tier -I account has tax benefit under 3 sections:
1. Section 80CCD(1) – Employee contribution up to 10% of basic salary and dearness allowance (DA) up to 1.5 lakh is eligible for tax deduction. [This contribution is part of Sec 80C 1.5 Lakh investment limit]. Self-employed can also claim this tax benefit. However, the limit is 10% of their annual income up to a maximum of Rs 1.5 Lakhs.
2. Section 80CCD(1B) – Additional exemption up to Rs 50,000 in NPS is eligible for income tax deduction. This was introduced in Budget 2015.
3. Section 80CCD(2) – Employer’s contribution up to 10% of basic plus DA is eligible for deduction under this section above the Rs 1.5 lakh limit in Sec 80CCD(1). This is also beneficial for an employer as it can claim tax benefit for its contribution by showing it as a business expense in the profit and loss account. Self-employed cannot claim this tax benefit.
Saturday, 21 July 2018
CIRCULAR NO: 20/2015
F.No. 275/192/2015-IT(B)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
North Block, New Delhi
Dated the 2nd December 2015
SUBJECT: INCOME-TAX DEDUCTION FROM SALARIES DURING THE FINANCIAL YEAR 2015-16 UNDER SECTION 192 OF THE INCOME-TAX ACT, 1961.
*****
Reference is invited to Circular No.17/2014 dated 10.12.2014 whereby the rates of deduction of income-tax from the payment of income under the head "Salaries" under Section 192 of the Income-tax Act, 1961 (hereinafter ‘the Act’), during the financial year 2014-15, were intimated. The present Circular contains the rates of deduction of income-tax from the payment of income chargeable under the head "Salaries" during the financial year 2015-16 and explains certain related provisions of the Act and Income-tax Rules, 1962 (hereinafter the Rules). The relevant Acts, Rules, Forms, and Notifications are available at the website of the Income Tax Department- www.incometaxindia.gov.in.
Download and Prepare at a time 100 employees Form 16 Part-A&B for F.Y.2017-18 [This Excel Utility have all the amended section of Income Tax as per Finance Budget 2017-18]
5.5.3 Deduction in respect of contribution to pension scheme of Central Government (Section 80CCD):
Section 80CCD(1) allows an employee, being an individual employed by the Central Government on or after 01.01.2004 or being an individual employed by any other employer, or any other assessee being an individual, a deduction of an amount paid or deposited out of his income chargeable to tax under a pension scheme as notified vide Notification F. N. 5/7/2003- ECB&PR dated 22.12.2003 National Pension System-NPS or as may be notified by the Central Government. However, the deduction shall not exceed an amount equal to 10% of his salary (includes Dearness Allowance but excludes all other allowance and perquisites).
As per section 80CCD(1B), an assessee referred to in 80CCD(1) shall be allowed a deduction in computation of his income, of the whole of the amount paid or deposited in the previous year in his account under the pension scheme notified or as may be notified by the Central Government, which shall not exceed Rs. 50,000. The deduction of Rs. 50,000 shall be allowed whether or not any deduction is allowed under sub-section(1). However, the same amount cannot be claimed both under sub-section (1) and sub-section (1B) of section 80CCD.
As per Section 80CCD(2), where any contribution in the said pension scheme is made by the Central Government or any other employer then the employee shall be allowed a deduction from his total income of the whole amount contributed by the Central Government or any other employer subject to limit of 10% of his salary of the previous year.
If any amount is standing to the credit of the employee in the pension scheme referred above and deduction has been allowed as stated above, and the employee or his nominee receives this amount together with the amount accrued thereon, due to the reason of
(i) Closure or opting out of the pension scheme or
(ii) Pension received from the annuity plan purchased and taken on such closure or opting out
then the amount so received during the FYs shall be the income of the employee or his nominee for that Financial Year and accordingly will be charged to tax.
Where any amount paid or deposited by the employee has been taken into account for the purposes of this section, a deduction with reference to such amount shall not be allowed under section 80C.
Further, it has been specified that w.e.f 01.04.09 any amount received by the employee from the New Pension Scheme shall be deemed not to have been received in the previous year if such amount is used for purchasing an annuity plan in the same previous year.
It is emphasized that as per the section 80CCE the aggregate amount of deduction under sections 80C, 80CCC and Section 80CCD(1) shall not exceed Rs.1,50,000/-. The deduction allowed under section 80 CCD(1B) is an additional deduction in respect of any amount paid in the NPS up to Rs. 50,000/-. However, the contribution made by the Central Government or any other employer to a pension scheme u/s 80CCD(2) shall be excluded from the limit of Rs.1,50,000/- provided under this section.
5.5.3 Deduction in respect of contribution to pension scheme of Central Government (Section 80CCD):
Section 80CCD(1) allows an employee, being an individual employed by the Central Government on or after 01.01.2004 or being an individual employed by any other employer, or any other assessee being an individual, a deduction of an amount paid or deposited out of his income chargeable to tax under a pension scheme as notified vide Notification F. N. 5/7/2003- ECB&PR dated 22.12.2003 National Pension System-NPS or as may be notified by the Central Government. However, the deduction shall not exceed an amount equal to 10% of his salary (includes Dearness Allowance but excludes all other allowance and perquisites).
As per section 80CCD(1B), an assessee referred to in 80CCD(1) shall be allowed a deduction in computation of his income, of the whole of the amount paid or deposited in the previous year in his account under the pension scheme notified or as may be notified by the Central Government, which shall not exceed Rs. 50,000. The deduction of Rs. 50,000 shall be allowed whether or not any deduction is allowed under sub-section(1). However, the same amount cannot be claimed both under sub-section (1) and sub-section (1B) of section 80CCD.
As per Section 80CCD(2), where any contribution in the said pension scheme is made by the Central Government or any other employer then the employee shall be allowed a deduction from his total income of the whole amount contributed by the Central Government or any other employer subject to limit of 10% of his salary of the previous year.
If any amount is standing to the credit of the employee in the pension scheme referred above and deduction has been allowed as stated above, and the employee or his nominee receives this amount together with the amount accrued thereon, due to the reason of
(i) Closure or opting out of the pension scheme or
(ii) Pension received from the annuity plan purchased and taken on such closure or opting out
then the amount so received during the FYs shall be the income of the employee or his nominee for that Financial Year and accordingly will be charged to tax.
Where any amount paid or deposited by the employee has been taken into account for the purposes of this section, a deduction with reference to such amount shall not be allowed under section 80C.
Further, it has been specified that w.e.f 01.04.09 any amount received by the employee from the New Pension Scheme shall be deemed not to have been received in the previous year if such amount is used for purchasing an annuity plan in the same previous year.
It is emphasized that as per the section 80CCE the aggregate amount of deduction under sections 80C, 80CCC and Section 80CCD(1) shall not exceed Rs.1,50,000/-. The deduction allowed under section 80 CCD(1B) is an additional deduction in respect of any amount paid in the NPS up to Rs. 50,000/-. However, the contribution made by the Central Government or any other employer to a pension scheme u/s 80CCD(2) shall be excluded from the limit of Rs.1,50,000/- provided under this section.
Sunday, 17 June 2018
CIRCULAR NO: 20/2015
F.No. 275/192/2015-IT(B)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
North Block, New Delhi
Dated the 2nd December 2015
SUBJECT: INCOME-TAX DEDUCTION FROM SALARIES DURING THE FINANCIAL YEAR 2015-16 UNDER SECTION 192 OF THE INCOME-TAX ACT, 1961.
*****
Reference is invited to Circular No.17/2014 dated 10.12.2014 whereby the rates of deduction of income-tax from the payment of income under the head "Salaries" under Section 192 of the Income-tax Act, 1961 (hereinafter ‘the Act’), during the financial year 2014-15, were intimated. The present Circular contains the rates of deduction of income-tax from the payment of income chargeable under the head "Salaries" during the financial year 2015-16 and explains certain related provisions of the Act and Income-tax Rules, 1962 (hereinafter the Rules). The relevant Acts, Rules, Forms, and Notifications are available at the website of the Income Tax Department- www.incometaxindia.gov.in.
Download and Prepare at a time 100 employees Form 16 Part-A&B for F.Y.2017-18 [This Excel Utility have all the amended section of Income Tax as per Finance Budget 2017-18]
5.5.3 Deduction in respect of contribution to pension scheme of Central Government (Section 80CCD):
Section 80CCD(1) allows an employee, being an individual employed by the Central Government on or after 01.01.2004 or being an individual employed by any other employer, or any other assessee being an individual, a deduction of an amount paid or deposited out of his income chargeable to tax under a pension scheme as notified vide Notification F. N. 5/7/2003- ECB&PR dated 22.12.2003 National Pension System-NPS or as may be notified by the Central Government. However, the deduction shall not exceed an amount equal to 10% of his salary (includes Dearness Allowance but excludes all other allowance and perquisites).
As per section 80CCD(1B), an assessee referred to in 80CCD(1) shall be allowed a deduction in computation of his income, of the whole of the amount paid or deposited in the previous year in his account under the pension scheme notified or as may be notified by the Central Government, which shall not exceed Rs. 50,000. The deduction of Rs. 50,000 shall be allowed whether or not any deduction is allowed under sub-section(1). However, the same amount cannot be claimed both under sub-section (1) and sub-section (1B) of section 80CCD.
As per Section 80CCD(2), where any contribution in the said pension scheme is made by the Central Government or any other employer then the employee shall be allowed a deduction from his total income of the whole amount contributed by the Central Government or any other employer subject to limit of 10% of his salary of the previous year.
If any amount is standing to the credit of the employee in the pension scheme referred above and deduction has been allowed as stated above, and the employee or his nominee receives this amount together with the amount accrued thereon, due to the reason of
(i) Closure or opting out of the pension scheme or
(ii) Pension received from the annuity plan purchased and taken on such closure or opting out
then the amount so received during the FYs shall be the income of the employee or his nominee for that Financial Year and accordingly will be charged to tax.
Where any amount paid or deposited by the employee has been taken into account for the purposes of this section, a deduction with reference to such amount shall not be allowed under section 80C.
Further, it has been specified that w.e.f 01.04.09 any amount received by the employee from the New Pension Scheme shall be deemed not to have been received in the previous year if such amount is used for purchasing an annuity plan in the same previous year.
It is emphasized that as per the section 80CCE the aggregate amount of deduction under sections 80C, 80CCC and Section 80CCD(1) shall not exceed Rs.1,50,000/-. The deduction allowed under section 80 CCD(1B) is an additional deduction in respect of any amount paid in the NPS up to Rs. 50,000/-. However, the contribution made by the Central Government or any other employer to a pension scheme u/s 80CCD(2) shall be excluded from the limit of Rs.1,50,000/- provided under this section.
5.5.3 Deduction in respect of contribution to pension scheme of Central Government (Section 80CCD):
Section 80CCD(1) allows an employee, being an individual employed by the Central Government on or after 01.01.2004 or being an individual employed by any other employer, or any other assessee being an individual, a deduction of an amount paid or deposited out of his income chargeable to tax under a pension scheme as notified vide Notification F. N. 5/7/2003- ECB&PR dated 22.12.2003 National Pension System-NPS or as may be notified by the Central Government. However, the deduction shall not exceed an amount equal to 10% of his salary (includes Dearness Allowance but excludes all other allowance and perquisites).
As per section 80CCD(1B), an assessee referred to in 80CCD(1) shall be allowed a deduction in computation of his income, of the whole of the amount paid or deposited in the previous year in his account under the pension scheme notified or as may be notified by the Central Government, which shall not exceed Rs. 50,000. The deduction of Rs. 50,000 shall be allowed whether or not any deduction is allowed under sub-section(1). However, the same amount cannot be claimed both under sub-section (1) and sub-section (1B) of section 80CCD.
As per Section 80CCD(2), where any contribution in the said pension scheme is made by the Central Government or any other employer then the employee shall be allowed a deduction from his total income of the whole amount contributed by the Central Government or any other employer subject to limit of 10% of his salary of the previous year.
If any amount is standing to the credit of the employee in the pension scheme referred above and deduction has been allowed as stated above, and the employee or his nominee receives this amount together with the amount accrued thereon, due to the reason of
(i) Closure or opting out of the pension scheme or
(ii) Pension received from the annuity plan purchased and taken on such closure or opting out
then the amount so received during the FYs shall be the income of the employee or his nominee for that Financial Year and accordingly will be charged to tax.
Where any amount paid or deposited by the employee has been taken into account for the purposes of this section, a deduction with reference to such amount shall not be allowed under section 80C.
Further, it has been specified that w.e.f 01.04.09 any amount received by the employee from the New Pension Scheme shall be deemed not to have been received in the previous year if such amount is used for purchasing an annuity plan in the same previous year.
It is emphasized that as per the section 80CCE the aggregate amount of deduction under sections 80C, 80CCC and Section 80CCD(1) shall not exceed Rs.1,50,000/-. The deduction allowed under section 80 CCD(1B) is an additional deduction in respect of any amount paid in the NPS up to Rs. 50,000/-. However, the contribution made by the Central Government or any other employer to a pension scheme u/s 80CCD(2) shall be excluded from the limit of Rs.1,50,000/- provided under this section.
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