Tax Exemption: While presenting the Budget 2025, Finance Minister Nirmala Sitharaman also proposed an extra tax exemption of Rs 50,000 under sub-section (1B) of section 80CCD of the Income Tax Act, 1961 for those investing in the government scheme NPS Vatsaly Scheme.
Tax Exemption: While presenting the Budget 2025, Finance Minister Nirmala Sitharaman made a big announcement regarding tax. Under the New Tax Regime, she proposed to impose 0 tax on annual income up to Rs 12 lakh. Which means that now there will be no tax liability on income up to Rs 12 lakh. Along with this, a new tax slab was also introduced, under which the basic exemption was increased from Rs 3 lakh to Rs 4 lakh.
This is not about the new tax slab… Now let’s talk about the old tax regime, regarding which a big announcement has also been made. In fact, while presenting the Budget 2025, Finance Minister Nirmala Sitharaman also proposed an extra tax exemption of Rs 50,000 under sub-section (1B) of section 80CCD of the Income Tax Act 1961 for those investing in the government scheme NPS Vatsaly Scheme.
This means that now if you invest or will invest in NPS Vatsaly Scheme in the name of your child, then you will get an additional tax exemption of up to Rs 50,000 under (1B) of section 80CCD. You can claim this exemption under the old tax regime. There is no provision for any kind of deduction in the new tax system.
What is NPS Vatsalya Yojana?
To improve the future of children, the government has started NPS Vatsaly Scheme. This scheme was officially launched on 18 September 2024 last year, under which parents can invest at least Rs 1000 in the name of the child. This scheme is for minors, but after the child turns 18 years old, it will change to NPS by default.
What are the rules of NPS Vatsalya?
There are some conditions under this scheme operated by PFRDA. The money invested under this scheme can be withdrawn a maximum of three times after a lock-in period of 3 years. According to the website of Central Bank of India, up to 25% of the contribution can be withdrawn three times after a lock-in period of 3 years for education, serious illness and disability.
On an amount of more than Rs 2.5 lakh, 80% of the amount is used to buy annuity, while 20% can be withdrawn as a lump sum. At the same time, an amount of 2.5 lakh or less can be withdrawn in one go.
This much tax exemption is available under NPS
According to a report by Business Today, Shefali Mundra, tax expert at ClearTax, says that tax exemption under NPS can be availed up to Rs 1.5 lakh under section 80C of the Income Tax Act and tax exemption up to Rs 50,000 under 80CCD (1B). On the other hand, the government has announced an additional deduction of Rs 50,000 under section 80CCD (1B) under the NPS Vatsalya Yojana.
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