Allow NPS investment tax break of Rs 50,000 in new tax regime in interim budget 2024: Experts

economictimes.indiatimes.com:

new tax regime which combines lower tax rates with a very limited number of exemptions. As of now, an individual's contribution of up to Rs 50,000 to the National Pension System (NPS) under Section 80CCD (1B) as deduction under the old tax regime but not under the new tax regime. Promotion of retirement saving is also a stated goal of the government because of which the above-mentioned deduction was allowed over and above the tax saving investment limit of Rs 1.5 lakh under Section 80C in the old tax regime.

Consequently, it becomes all the more necessary to allow the tax break for NPS contribution of up to Rs 50,000 under section 80CCD (1B) also in the new tax regime, say experts. It is hoped that the interim budget 2024 would add this important and necessary exemption to those available under the new tax regime, they add. This may encourage more people to shift from the old to the new tax regime as NPS is slowly becoming popular as a retirement planning tool.

In Budget 2020, the government had introduced a concessional tax regime — called the new tax regime — with lower tax rates and varying income slabs.

However, the new regime did not allow most of the commonly availed deductions and tax exemptions. Only the NPS-related deduction under Section 80CCD (2) of the Income-tax Act, 1961, was allowed under the new tax regime. This deduction is on employer's contribution to employee's NPS account and is available in the old tax regime also.