As reported by Mint, in Union Budget 2020, Finance Minister Nirmala Sitharaman had introduced a new income tax regime allowing taxpayers to choose a slab rate that had lower rates to pay.
After choosing such a slab rate, the taxpayer had to give up on all income tax benefits including Section 80C, Section 80 CCD (1) among others. However, income tax deduction under Section 80 CCD (2) is available for employees that have employers contributing to its National Pension System (NPS) account.
Regarding the income tax benefit available for NPS scheme beneficiaries, Optima Money Managers’ founder and Chief Executive Offer (CEO) Pankaj Mathpal stated, “Income Tax deduction available for NPS subscribers under Section 80 CCD (2) of the income tax act, is on the employer’s contribution to one’s NPS account. Since it is not a part of one’s annual income, NPS scheme beneficiaries can claim an income tax deduction on its employer’s contribution to its NPS account, even after opting for the new income tax regime.”
He continued by saying that all employees whose employer had implemented the NPS scheme will be able to claim income tax deduction after choosing the new regime.
Amit Gupta, the Managing Director (MD) of SAF Infotech said that the new regime has allowed a deduction under the Income Tax Act’s Section 80 CCD (2), which is applicable if an employer contributes to the NPS account of an employee. Employees can claim a maximum tax deduction of 10 per cent of their annual salary, where annual salary is basic plus dearness allowance (DA).