To provide relief to the taxpayers, the deadline to make tax-saving investments was first extended to June 30, 2020 and later extended further to July 31, 2020.
As the Financial Year (FY) 2019-20 ended amid the nationwide lockdown to contain the spread of Novel Coronavirus Covid-19, many taxpayers had failed to make their last minute tax-saving investments. To provide relief to the taxpayers, the deadline to make tax-saving investments was first extended to June 30, 2020 and later extended further to July 31, 2020.
While majority of tax-saving instruments – like Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), National Savings Certificate (NSC), Equity Linked Savings Scheme (ELSS), life insurance, Unit Linked Insurance Plan (ULIP), 5-year term deposit, etc – fall under section 80C of the Income Tax Act and help you in claiming deductions from taxable income up to Rs 1.5 lakh, voluntary contributions to Tier-1 Accounts of National Pension System (NPS) provides additional tax benefits up to Rs 50,000 over and above the 80C limit.
So, taxpayers, especially those in higher tax brackets, want to take advantage of the NPS contribution along with the 80C instruments.
However, contributions to NPS takes 2-3 working days to get credited in the fund accounts due to the complex organisational structure of the System, which on the other hand makes the contribution process simple by increasing the reach as well as enhancing safety due to increased layers of participants.
Due to the time lag between making a contribution and getting it credited in the respective fund accounts, the NPS subscribers need to contribute by 25th of the month on which the contribution deadline ends, especially if the contribution is made through cheque.
In case of online contribution, it is better to do it by 27th or 28th, depending on the number of working days available within the period, so that the contribution amount gets credited in the funds account on or before the deadline ends.
Normally, the deadline ends with the end of the respective financial year on March 31 of every year, but due to Covid-19 lockdown, will end on July 31, 2020 for the FY 2019-20.
So, if you are still waiting to contribute to the Tier-1 Account of NPS to avail deductions up to Rs 50,000 u/s 80CCD(1B), you can’t wait till July 31, 2020 and have to do it immediately.