New Tax System: In the financial year 2020-21, the government started the new tax regime. Since then, some changes are made in it in every budget. The government has made some changes in this budget as well. In this budget, 2 major changes were made in the new tax (Income Tax) system.
New Tax System: In the financial year 2020-21, the government started the new tax regime. Since then, some changes are made in it in every budget. The government has made some changes in this budget as well. In this budget, 2 major changes were made in the new tax system. First, the standard deduction has been increased from Rs 50,000 to Rs 75,000. The second change is that the employee’s contribution under Corporate NPS has been increased from 10 percent to 14 percent. Due to these changes in the new tax system, you can now get tax exemption on salary up to Rs 8.30 lakh. Let’s understand the calculation.
First know about the exemption under the tax slab
The government has made some changes in the last year’s budget to make the new tax system more attractive than the old tax system. Under this, you do not have to pay any tax up to Rs 3 lakh. On the other hand, if your taxable income is up to Rs 7 lakh, then you will also get tax exemption on Rs 3-7 lakh i.e. the remaining 4 lakh rupees. Also, the government has given the benefit of two types of deductions to make it more attractive.
1- Standard Deduction
In the old tax system, salaried people still get a standard deduction of Rs 50,000. However, now it has been increased to Rs 75,000. That is, no matter how much your salary is, you will not have to pay any tax on Rs 75,000. In this way, you will not be taxed on salary up to Rs 7.75 lakh, not Rs 7 lakh.
2- Corporate National Pension System
You can get some additional exemptions over and above the standard deduction by making contribution to NPS through the employer. Apart from the exemption of Rs 1.5 lakh under 80CCD(1) and Rs 50,000 under 80CCD(1B), there is an additional exemption under 80CCD(2). Under this, you will get exemption on the investment made by the employer in your NPS. Employees of private companies can now invest up to 14% of their basic salary in NPS. This figure was already 14% for government employees.
How will ₹8.30 lakh be tax free?
Let us assume that you have a package of Rs 8.30 lakh. In such a situation, your basic salary will be at least 50% (₹4.15 lakh) of your CTC. In such a situation, you can invest 14% of it i.e. up to Rs 58,100 in the corporate NPS account. You will get a standard deduction of Rs 75,000 on Rs 8.30 lakh and tax exemption of Rs 58,100 on corporate NPS. In this way, you will get a total deduction of up to Rs 1,33,100, due to which your taxable income will be less than Rs 7 lakh (Rs 6,96,900) and your tax liability will be zero.
What will have to be done to get this exemption?
Most companies provide the facility of NPS. You can talk to the HR of your company and invest in NPS. This investment is made from your basic salary and the result will be that your in-hand salary every month will be reduced. The good thing will be that you will be able to get additional tax exemption. If your company does not have the facility of NPS, then talk to HR once, they will guide you on this.
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