The expectations of individual taxpayers have grown dramatically since the third consecutive election of the Modi government, which was elected on July 23, 2024. The middle class is anticipated to receive a large portion of this money. It is anticipated that the government will make several significant announcements in the 2019 budget to help members of the National Pension Scheme (NPS). The tax exemption ceiling for NPS contributions, which is now 10%, may be raised to 12% in this budget.
Advantage of deduction under the previous system
Under the previous system, investments made into the National Pension Scheme (NPS) were eligible for an income tax deduction. It’s a government savings program designed to provide security in old age. It is regulated by the Pension Fund Regulatory and Development Authority (PFRDA). The money deposited in it and the interest received on it is tax-free. But a little tax is levied while withdrawing the money. Now PFRDA has recommended increasing the tax exemption. The regulator says that in terms of tax, there should be equal opportunities for companies and employers contributing to NPS just like EPFO, right now there is inequality in it.
Possibility of depositing up to 10% of income
People in the salaried class are eligible to deposit up to 10% of their pay under the NPS (National Pension Scheme). Entrepreneurs are allowed to deposit up to 20% of their gross revenue. The Income Tax Act’s section 80CCD(1) permits the use of this benefit. This can be combined with the Rs 1.5 lakh section 80C limit under the previous tax system. You can also receive a deduction of up to Rs 50,000 on the amount you voluntarily deposit in NPS if you are under the old tax regime. The Income Tax Act’s section 80CCD(1B) makes this available.
There are two advantages to raising the NPS cap.
The increased deduction of up to Rs 50,000 that salaried taxpayers are eligible for in Budget 2024 get for voluntary contribution to NPS is available only under the old tax regime. It is expected that the government will implement this deduction in the new tax system as well. This will have two benefits. First, taxpayers will be able to get the benefit of additional deductions even in the new tax regime. Second, along with the new tax regime, there will be more investment in retirement schemes as well.
In addition,
the government may decide to raise the Rs. 75,000 basic deduction cap under the new tax system from the current Rs. 50,000 cap. Whichever tax scheme the salaried class chooses, they will gain from this. Given price increases and inflation, the government may include it in Budget 2024. The administration may decide to implement some adjustments to improve the appeal of the new tax system.
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