How to get tax exemption on NPS payment

I made an online contribution to the National Pension System (NPS) on March 29, but this was not reflected in the NPS account statement until April 4, implying that the contribution is for the 2022 financial year -23. Since my bank account was debited in the 2021-22 financial year, will I qualify for an income tax (IT) exemption under Section 80 for the 2021-22 financial year ?

—Ravichandran

In accordance with the provisions of the Computers Act 1961, a person employed by the Central Government (on or after 1 April 204)/any other employer or any other individual taxpayer, who has paid or deposited any amount into his account during the exercise to notified pension schemes (including the NPS), are eligible for a deduction (up to a specified amount) in computing income.

Based on the literal reading of the provisions, it appears that the deduction may be granted to the individual in the year in which the amount is paid or deposited by him in his NPS account. Therefore, in your case, since the amounts were paid/assessed to your NPS account on March 29, 2022, a deduction should be allowed for the 2021-22 financial year.

However, in the absence of specific instructions/clarifications, this may be reviewed by the tax authorities who may then need to be justified on the basis of the above provisions and proof of payment, i.e. the debit of the amount paid and the contribution receipt generated for March 29, 2022.

I am a civil servant and my taxable income is lower than the basic exemption ceiling (lower than 5,000,000). However, I received 6,000 as my university’s cash prize for educational performance. How to declare this additional income?

— Name masked on request

In the event that you are under 60, in accordance with the provisions of the 1961 computer law, the maximum non-taxable amount (basic exemption ceiling) applicable in your case is 2.5 million. However, please note that in the case of an individual residing in India with taxable income up to 5 lakh, u/s 87A tax relief from law (up to 12,500) is available due to which no tax liability needs to be filed if the taxable income is up to 5,000,000.

Since the state university prize money is not in the nature of scholarships awarded to cover educational costs, the amount so received will be taxable in your hands as “income from other sources”. “.

If your total taxable income (including prize money) does not exceed 5 lakh, then there will be no tax liability. If your total taxable income exceeds 5 lakh, u/s 87A relief will not be available and you will have to pay taxes according to the applicable slab rates (which will depend on your choice of tax regime i.e. old tax regime or new tax system). In either scenario, you will have to file a tax return if the taxable income exceeds 2.5 million.

Parizad Sirwalla is Partner and Head, Global Mobility Services, Tax, KPMG India.

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