It is not so easy to get rid of the hassle of tax on income up to Rs 13 lakh 70 thousand. This is possible only when the employer gives NPS benefits as part of the company’s cost.
Income Tax Calculation: The Government of India has announced to make income up to 12 lakhs tax free annually. Income up to 12 lakh 75 thousand is tax free with standard deduction. But do you know that you will not have to pay a single penny tax on income more than one lakh. That is, you will have to pay zero income tax even on income up to 13 lakh 70 thousand. Just for this, you will have to make such an investment, which is going to prove to be very useful for you in old age. That is, get the mango and the seed for nothing. You can avoid paying tax on income up to 13 lakh 70 thousand by investing in NPS i.e. National Pension System.
This math will save you from tax even on income of 13.70 lakhs
If you are a salaried person, investing up to 14 percent of the basic salary in NPS gives the benefit of deduction in income tax. Suppose your salary is Rs 13 lakh 70 thousand. Its basic salary can be up to 6 lakh 85 thousand. 14% of 6.85 lakh will be 95 thousand 900 rupees. That means by depositing this much in NPS, you can get the benefit of deduction in income tax.
Add 75 thousand standard deduction to this. So the total amount for deduction becomes 1 lakh 70 thousand. According to the income tax slab, there is no tax on annual income up to 12 lakhs. After adding 1 lakh 70 thousand rupees of NPS deduction and standard deduction, in this way, annual income up to 13 lakh 70 thousand can be tax free.
It will depend on the employer to provide the benefit
However, it is not so easy to get rid of the hassle of tax on income up to 13 lakh 70 thousand. This is possible only when the employer gives NPS benefit as part of the company’s cost. Staff cannot choose it themselves. NPS was launched almost 10 years ago, but barely 22 lakh taxpayers have invested in it.