I have been investing Rs 50,000 in the National Pension System (NPS) every year. If I enrol through my employer, will I still get tax benefit up to 10 per cent of basic over and above this Rs 50,000 limit? In that case, will the total tax benefits of Sections 80C, 80CCD (1B), 80CCD (2) under the Income-tax Act, 1961 be Rs 2 lakh or Rs 2 lakh plus 10 per cent of basic.
For your contribution towards NPS, you can claim a total of Rs 1.50 lakh under Section 80 CCD (1) and an additional amount of Rs. 50,000 under Section 80 CCD (1B). It is not necessary that you invest Rs. 50,000 separately for claiming deduction under Section 80CCD (1B), as any amount of contribution in NPS overflowing within the limits of Rs 1.50 lakh as prescribed under Section 80 CCE will qualify for this additional deduction. The deductions under Section 80C, 80CCD (1B) are available only if you opt for the old tax regime.
As far as contribution by your employer towards your NPS account is concerned, if you opt for the new tax regime, this is allowed up to 14 per cent of basic and 10 per cent under the old tax regime. Employer’s combined contribution toward Employees’ Pension Scheme (EPS), NPS and superannuation beyond Rs 7.50 lakh is treated as taxable salary.
I am planning to buy a plot of land and construct a residential house on it. I plan to take a home loan of Rs 30 lakh and finish construction by June 2028. I also intend to rent it out. Can I avail of the tax exemption on interest under Section 24 of the Income-tax Act, 1961?
You will be able to claim tax benefits under Section 24(b) as well as under Section 80C for the home loan taken for purchase of the plot and construction of house on the same if you opt for the old tax regime in case the house is intended to be used for self-occupation. Do note that the deductions will be available from the year in which the construction gets completed.
In case the property is let out, the deduction would be available against 70 per cent of the rental income after deducting 30 per cent of the rent from the let-out house. Do note that in case the loss under the house property income is more than Rs 2 lakh, you will be allowed to set off the same against your other income only up to Rs 2 lakh, and the unabsorbed portion of loss shall be carried forward for set-off in subsequent eight years under the old tax regime.
If you opt for the new tax regime, you will be able to claim interest only up to the net taxable rent, and any loss under the house property head will not be allowed to be set off against other income or can be carried forward.
I had invested some of my fixed deposits (FDs) in my mother’s name, who is a senior citizen. Now she wants to return me those investments. What will be the tax implications for both of us?
The tax treatment of the money which your mother wants to return to you would depend on whether you had treated the amount as a loan or a gift when you had transferred the money to her account.
In case you had treated it as a loan, the same can be treated as return of loan. The additional amount earned and accumulated can be returned to you as a gift. In case the same was treated as a gift initially the same can be returned back as a gift. In either of the situations, it does not have any tax implications for you as well as your mother, as gifts from close relatives like mother and child are exempt under Section 56(2) of the Income-tax Act, 1961.
The author is a tax and investment expert and can be reached on jainbalwant@gmail.com
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