New Benefits announced for NPS Subscribers in Union Budget 2017-18

In a bid to provide further impetus to the National Pension System (NPS), the following provisions have been introduced in the Finance Bill 2017 laid down in the Parliament today.

Tax-exemption to partial withdrawal from National Pension System (NPS)

The existing provision of section 10(12A)of the Income Tax Act, 1961 provides that payment from National Pension System (NPS) to a subscriber on closure of his account or opting out shall be exempt up to 40% of total corpus at the time of withdrawal . The amount utilized for purchase of annuity is also tax exempt. At the time of normal exit, 40% of the total corpus is mandatorily required to be purchased for annuity. The subscriber has the option to use higher amount for purchase of annuity.

In order to provide further relief to the subscriber of NPS, it has been proposed to insert a new clause (12B) in the section 10 of Income Tax Act, 1961 to provide exemption on partial withdrawal not exceeding 25% of the contribution made by an employee in accordance with the terms and conditions specified under Pension Fund Regulatory and Development Authority Act, 2013 and regulations made there under.

This benefit will be effective on partial withdrawal made by the subscriber after 1st April 2017.

Further, Contribution up to 20% of the Gross Income of the Self-employed individual (Individual other than salaried class) will be deductible from the taxable income under Section 80CCD (1) of the Income Tax Act, 1961, as against 10% earlier.

This is with a view to provide parity between a salaried employee and a self-employed.

This benefit will be available on contribution made by the self employed persons on or after 1st April 2017.

This increased limit for tax benefit will help the self-employed individuals, to save taxes on higher contribution in NPS and thereby properly plan for their old age income security.

Additional tax deduction on investment upto Rs. 50000/- under Section 80CCD (1B) will continue to remain the same for all NPS subscribers whether salaried or self-employed.

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Budget 2017 impact on income tax: Who pays more, who pays less and by how much

Budget 2017 impact on your personal income tax: Who pays more, who pays less and by how much by Economic Times

Here’s who will pay less and who will pay more personal tax following the finance minister’s personal tax proposals in Budget 2017. Once the FM’s proposals are implemented:

1. A person with taxable income (after deductions such as Section 80C etc) of Rs 3.5 lakh will pay a tax of Rs 2575 as against Rs 5150 payable earlier.

2. Persons with taxable income over Rs 5 lakh up to Rs 50 lakh will pay Rs 12875 less (including the cess saved), according to EY.

3. However, individuals with taxable income over Rs 50 lakh upto Rs 1 crore will be paying a flat surcharge of 10% on the total tax payable by them. For example, an individual earning gross total income of Rs 60 lakh will pay (after availing tax deductions as assumed in the table) Rs 1,45,024 additional tax due to the surcharge. As shown in the table a person with gross total income of Rs 60 lakh who was paying tax of Rs 15,91,865 would now be paying Rs 17,36,889 (after availing deductions and application of surcharge and cess).

4. Those with income over Rs 1 crore would continue to pay the surcharge of 15% but would get the meagre benefit of saving Rs 12875 (including saving of cess but excluding the saving on surcharge). For example, a person with gross total income of Rs 1. 2 crore will pay (after availing deductions) Rs 39,65,706 as taxes including surcharge and cess as against Rs 39,80,512 payable earlier.