Budget 2019 India: Deposits by government employees in Tier-II account will get Section 80C tax exemption.
Union Budget 2019 India: While there was no increase in basic tax exemption nor any hike in the deduction limit under Section 80C, there are a few measures in Budget 2019 that would give some relief to individuals. A look at the fine print.
Incentives to NPS subscribers
Apart from notifying maturity withdrawals from National Pension Systems (NPS) tax-free, the Budget has proposed to amend Section 80C of Income Tax Act, so that any amount deposited by a Central government employee in his Tier-II account will be eligible for tax deduction. This deduction will, however, not be applicable to a non-central government subscriber.
At present, for all subscribers amount deposited up to Rs 1.5 lakh in Tier I account in a year is eligible for tax deduction under Section 80C. Additionally, investment of up to Rs 50,000 a year in NPS is given tax deduction under Section 80CCD, which is over and above the benefit available on Rs 1.5 lakh under Section 80C.
Tier I account in NPS is a non-withdrawable account to which a subscriber contributes to build a retirement corpus. Tier II account is a voluntary savings facility and a subscriber can withdraw from this account whenever he wishes.
Contributions towards the Tier II account can be made using the PRAN number and a subscriber can choose between equity funds, government securities and fixed income instruments for his investments.
TDS on non-exempt life insurance payout on net basis
In order to reduce difficulties for an assessee, the Budget proposes to deduct 5% tax on income component of the sum paid for life insurance proceeds. At present, tax is deducted at 1% on the gross maturity payout under the policy. Deducting tax on gross amount creates difficulties for an assessee who has to pay tax on net income after deducting the amount of insurance premium for the total amount received. This tweak will reduce the burden on an assessee.
“From the point of view of tax administration as well, it is preferable to deduct tax on net income so that the income as per TDS return of the deductor can be matched automatically with the return of income filed by the assessee,” the Finance Bill says.
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Under Section 10 (10D) of the Income Tax Act, maturity amount from a life insurance policy is exempt from tax. However, if the insurance policy is issued on or before March 31, 2012 and the premium paid during the term of the policy exceeds 20% of the sum assured, then any amount received from the insurance policy will be taxable in the hands of the receiver. In case of a single premium life insurance policy, the maturity amount will be tax-free if the minimum sum assured throughout the policy term remains at least 10 times the single premium paid.