Private sector employees should focus on EPF, PPF, NPS for retirement, says Preeti Sharma of BDO India

livemint.com:

MintGenie, Sharma said that the Government should chalk down a clear transition plan to move to the new tax regime with certain modifications that allow deductions on account of select investments.Individuals opting for the new tax regime cannot claim several exemptions and deductions, such as House Rent Allowance, Leave Travel Concession, Savings under 80C such as Employee Provident Fund (EPF)/ Public Provident Fund (PPF)/ Equity Linked Savings Scheme (ELSS), medical insurance premiums under 80D, National Pension Scheme (NPS) under 80CCD and many more. Given that the legacy tax system was developed to encourage investment planning to save taxes, many individual taxpayers are tuned to make those annual investments that are now not eligible for a tax break in the new tax regime.

With the private sector employees in India not being eligible to receive any pension post-retirement, EPF, PPF, NPS, and ELSS are in high demand among individuals. These investments serve a dual purpose, one being the corpus formation for retirement, and the other is the eligibility to claim a deduction from taxes against these payments.

With these deductions being unavailable under the new tax regime, it has attracted less takers. The Government should chalk down a clear transition plan to move to the new tax regime with certain modifications that allow deductions on account of select investments.

This will help in building a pensionable society. There are limited tax planning opportunities available to the salaried class.

The new tax regime provides for preferential tax rates, but it also limits the deductions that can be claimed by an Individual taxpayer. However, we have listed down a few salary components that may continue its tax advantage