As the financial year 2019-20 begins, I hope every salaried employee must be worried on tax savings, where, how much to invest etc.,
It’s a time to plan your tax savings, referring to recent budget 2019, I have made a small write up were salaried employees can rethink, realign there investment plan.
Lot of salaried employees are unaware of certain good schemes like NPS (National Pension Scheme) in the said presentation efforts are made to through light, benefit on NPS scheme with illustrative examples.
I hope definitely this article will help in Tax Savings
Best Regards,
Srinivas
Salient Features of Interim Budget 2019
Interactive Session on Budget Pronouncement|Tax Planning
Income Tax Slab Rates for FY 2019-20 and other changes for salaried class**
♦ There is no change in Income Tax Slab Rates. However GOI announced the increase in Income Tax Rebate u/s 87A from current INR 2,500 to INR 12,500
♦ Above stated rebate is applicable for “Resident Assesse” whose total income does not exceed INR 5,00,000
♦ The rebate has been given by amending Section 87A and increasing the eligibility limit from an income of INR 3,50,000 to INR 5,00,000.
♦ Increase in standard deduction from INR 40,000 to INR 50,000, results in effective savings would be between INR 2,080 & INR 3,120
♦ TDS threshold on interest earned on bank FD/ Post Office FD raised from INR 10000 to INR 50000
| Particulars | Mr. X | Mr. Y |
| Total Income | 500,000 | 505,000 |
| Tax on Total Income | 12,500 | 13,500 |
| Less: Rebate u/s 87A | 12,500 | NIL |
| Add: Cess 4% | NIL | 540 |
| Total Tax Payable | NIL | 14,040 |
Example 2: Coupled with other deductions currently available such as for investments, interest on housing loan, standard deduction, etc.,
| Particulars | Amount |
| Gross Total Income | 965,000 |
| Less: Standard Deduction | 50,000 |
| Less: Interest on House Loan | 200,000 |
| Less: Investment u/s 80C | 150,000 |
| Less: NPS (individual) | 50,000 |
| Less: Medical Insurance* | 25,000 |
| Total Deductions | (475,000) |
| Total Income | 490,000 |
| Applicable Tax | NIL |
National pension scheme
What does National Pension System offer you? Under NPS, Subscriber gets the option to open Tier I account and Tier II account. Difference between Tier I and Tier II accounts are as mentioned below
| Tier I NPS Account | Tier II NPS Account |
| It is also known as Pension account | It is known as investment account |
| Withdrawal from this account is permitted after 10 years of account opening or attaining the age 60 years whichever comes early | Withdrawal from this account can be done at any point of time as per Subscriber’s need |
| Minimum annual contribution required for this account is Rs. 1000 | NA |
Tax saving through nps investment
♦ Section 80CCD governs the NPS Contribution
♦ Tax Benefits for Salaried Employees
| NPS Account | Tax Benefit |
| Tier 1 : Salaried Individual | Investment up to 10% of Salary (Basic + Dearness Allowance) is deductible from taxable income u/s 80CCD (1) of Income Tax Act, 1961 subject to 1.5 lakhs limit of section 80C
Contribution towards NPS by employer 80CCD(2) under Corporate NPS Scheme, employee can claim deduction up to 10% of Basic+DA Individual can claim additional deduction up to INR 50000 u/s 80CCD(1B) |
How NPS will save tax : For instance, If Basic salary is 600000 per annum gross being 12,00,000
Particulars |
Amount (Case 1 NO NPS INVT |
Amount (Case 2) NPS INVT u/s 80CCD(1B) |
Amount (Case 2) NPS INVT u/s 80CCD (2) 80CCD(1B) |
Gross Total Income |
12,00,000 |
12,00,000 |
12,00,000 |
Less: Standard Deduction |
50,000 |
50,000 |
50,000 |
Less: Interest on House Loan |
200,000 |
200,000 |
200,000 |
Less: Investment u/s 80C |
150,000 |
150,000 |
150,000 |
Less: NPS (individual) |
-NA- |
50,000 |
50,000 |
Less: NPS (Corporate Employee Contribution) 10% of Basic |
-NA- |
-NA- |
60,000 |
Less: Medical Insurance* |
25,000 |
25,000 |
25,000 |
Total Deductions |
(425,000) |
(475,000) |
(535,000) |
Total Income |
7,75,000 |
7,25,000 |
665,000 |
Applicable Tax |
INR 70,200 |
INR 59,800 |
INR 47,320 |
Author Bio
Hi,
I would like to know about Section 80D & 80 DDB.
A non working Sr. Citizen has interest income from bank, pension from lic around Rs. 34,500/- p. a., dividend income.
1 Can spouse, children / HUF pay for Medical Insurance and claim benefit.
2 Can Section 80 DDB benefit be claimed by spouse / children / HUF?
Thanks in anticipation
Pravin mehta
Suggest me the optimal salary structure for Pvt co employee having salary of 100000 pm basic and hra 40% of this in metro city. Thank you
If CTC of employee is 30 Lacs i.e. 20lacs fixed pay and 10 lacs variable paid on half yearly basis.
Can employer provide reimbursement of 5.40 lacs (tax free) in order to deduct less TDS and more in hand salary.
for seior citizen amount paid in cash for medical expenditure is allowed under 80d for ay 2019-20
Thanks Srinivas, for bringing in several useful points from Interim Budget 2019. At ICA (Institute of Company Accountants) we provide practical training and up-to-date courses on taxation and accounting. Free classes are conducted every Friday which is open to all. Please feel free to contact at ica.org.in
Dear Sir,
Could you please share the IT calculation sheet in xls format, to plan our savings.
Thanks
Dear Sir,
Could you please share the IT calculation sheet in xls format, to plan our savings.
Thanks
Sir, please clarify
Govt employees(GPF Holders) are eligible to take NPS for claiming 50000 under section 80ccd(2).
I think we can take only tier-2 Where tier-1 Only eligible for 80ccd
Dear Mr Srinivas
I read your article & your expert view but I understand that TDS threshold on interest income earned on bank/PO raised to INR 40000/- & excludes Interest on bank FD’s.
Regards
S K Jain
M-9837030904
Sir,
please clarify,
amount invested by Employee would be added with gross salary and can be claimed as 80CCD(2)
or directly claim as deduction?
NPS (Corporate Employee Contribution) 10% of Basic