Investments in the NPS offer attractive tax benefits under the Income Tax Act through two key provisions: 1. Deduction Under Section 80CCD(1) Who Can Claim: All individual taxpayers (both salaried and self-employed). What It Offers: You can claim a deduction on your contribution to the NPS, which isRead more
Investments in the NPS offer attractive tax benefits under the Income Tax Act through two key provisions:
1. Deduction Under Section 80CCD(1)
- Who Can Claim:
- All individual taxpayers (both salaried and self-employed).
- What It Offers:
- You can claim a deduction on your contribution to the NPS, which is calculated as a percentage of your salary:
- For salaried individuals: Up to 10% of salary.
- For self-employed individuals: Up to 20% of their gross income.
- You can claim a deduction on your contribution to the NPS, which is calculated as a percentage of your salary:
- Note:
- This deduction is available in addition to the standard deduction under Section 80C (though some NPS contributions may already be included in the overall 80C limit in certain cases).
2. Additional Deduction Under Section 80CCD(1B)
- What It Offers:
- An extra deduction of ₹50,000 is available exclusively for contributions to the NPS.
- Key Point:
- This additional deduction is over and above what you claim under Section 80CCD(1) or Section 80C.
- It is available irrespective of your other investments and does not form part of the overall 80C limit.
Summary Table
| Section | Eligible Contributions | Deduction Limit | Notes |
|---|---|---|---|
| 80CCD(1) | NPS contributions (for salaried or self-employed individuals) | Up to 10% of salary (salaried) or 20% of gross income (self-employed) | Available along with regular deductions, may form part of 80C limits in certain cases |
| 80CCD(1B) | Additional NPS contributions | Additional ₹50,000 deduction | Over and above deductions under Section 80CCD(1) and 80C; not affected by other limits |
Key Takeaways
- Investing in NPS can significantly reduce your taxable income.
- You can enjoy a deduction based on your salary/income under Section 80CCD(1) plus an extra ₹50,000 benefit under Section 80CCD(1B).
- Keep proper records of your NPS contributions and ensure that your investment is made through eligible channels to claim these deductions.
What are the investment eligible for section 80 deductions under income tax act?
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Yes, losses can also be clubbed under the Income Tax Act, 1961, in cases where income is required to be clubbed as per Section 64. This typically happens in situations where income from one person (such as a spouse, minor child, or specified relative) is added to another person's income. When Can LoRead more
Yes, losses can also be clubbed under the Income Tax Act, 1961, in cases where income is required to be clubbed as per Section 64. This typically happens in situations where income from one person (such as a spouse, minor child, or specified relative) is added to another person’s income.
When Can Losses Be Clubbed?
1️⃣ Income from Transferred Assets (Section 64)
2️⃣ Minor Child’s Income (Section 64(1A))
3️⃣ Partnership Firm or HUF Cases
Example Scenario
🔹 A father gifts ₹5 lakh to his minor child, who invests it in stocks and incurs a loss of ₹50,000. Since the child’s income is clubbed with the parent’s income, the loss is also clubbed, and the parent can use it for set-off.
🔹 A husband transfers a property to his wife without consideration. If the wife incurs a rental loss, the husband must club that loss with his income.
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