Tax Saving Tips:  The new financial year 2024-25 will commence on April 01 and the current one will end on March 31. As fiscal 2023-24 comes to an end, we have been witnessing a lot of talk about investing in tax-saving schemes. Analysts and professionals are also writing about ways to save taxes. But what if we plan for tax saving at the beginning of the financial year, it will erase the chaos of saving tax at the end of the financial year. We all know that financial planning is an essential step to be ready for proper tax saving.

When we talk about tax benefits, the taxpayer often thinks around 80C of the income tax act. Under Income Tax Act 80C, tax exemption of up to Rs 1.5 lakh can be claimed.

In this article, we will talk about the National Pension System, which is also known as the New Pension Scheme. Investment in NPS attracts double tax benefits.

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How to get double tax benefit under NPS

You can claim tax benefits in NPS under section 80CCD of Income Tax. This section has two sub-sections – 80CCD(1) and 80CCD(2). Sub-section of 80CCD(1) is 80CCD(1B).

With 80CCD(1) you can avail tax benefit of up to Rs 1.5 lakh, and using 80CCD(1B) you can avail tax benefit of Rs 50,000.

Under Section 80CCD, the taxpayer can also claim income tax exemption along with the benefit of Rs 2 lakh.

If the investment is made in NPS through the employer i.e. company then you get more benefits as income tax can be claimed by the company along with the taxpayer. 10 percent of the basic salary and dearness allowance can be invested in the NPS fund by the employer.

A central government employee can invest up to 14 percent in NPS. Many companies in the country provide NPS facilities to their employees. To avail of the NPS benefits you have to talk to the HR of your company to invest in NPS.

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Tax calculation

If your salary is Rs 10 lakh, it is included in the income tax slab. Now subtract Rs 1.5 lakh of 80C and Rs 50 thousand of 80CCD(1B) from the total salary. After this make a further deduction of Rs 50,000, and taxable income will become Rs 7.50 lakh.

Now the company can save tax up to Rs 2.50 lakh from employee reimbursement. Thus the taxable income will become Rs 5 lakh i.e. your income tax will become 0 (zero).

If the taxable income of the employee is less than Rs 5 lakh then he can avail rebate under Section 87A of the Income Tax Act. This means that the tax on the total income of the taxpayer will be zero.