Tax Exemption Update: Old Taxpayers to Receive Additional ₹50,000 Benefit Under NPS Vatsalya Scheme
Tax Exemption Update:The Union Budget 2025 brought significant relief for old tax regime taxpayers, as Finance Minister Nirmala Sitharaman announced an extra tax exemption of ₹50,000 under Section 80CCD (1B) of the Income Tax Act, 1961 . This benefit applies to those investing in the NPS Vatsalya Scheme , a government initiative designed to secure the financial future of children.
Tax Exemption Update:Key Announcements in Budget 2025
1. Higher Tax Exemption in the New Tax Regime
- Annual income up to ₹12 lakh is now completely tax-free under the New Tax Regime.
- The basic exemption limit has been raised from ₹3 lakh to ₹4 lakh.
- A new tax slab structure has been introduced to reduce tax liabilities.
2. Additional ₹50,000 Tax Deduction in the Old Tax Regime
- Taxpayers following the Old Tax Regime can claim an extra deduction of ₹50,000 under Section 80CCD (1B).
- This deduction applies only to investments in the NPS Vatsalya Scheme.
- The benefit is not available under the New Tax Regime.
Tax Exemption Update:What is the NPS Vatsalya Scheme?
The NPS Vatsalya Scheme was launched on September 18, 2024, to help parents invest in their child’s future. The scheme allows investments starting from ₹1,000, and the funds remain locked until the child turns 18, after which it automatically converts into an NPS account.
Tax Exemption Update:Key Features of the Scheme
✅ Three Partial Withdrawals Allowed: Investors can withdraw up to 25% of the contribution after three years for purposes like education, medical emergencies, or disability.
✅ Annuity & Lump Sum Withdrawals:
- If the accumulated amount is above ₹2.5 lakh, 80% must be used for an annuity (monthly pension), while 20% can be withdrawn as a lump sum.
- If the total investment is ₹2.5 lakh or less, it can be withdrawn completely in one go.
Tax Exemption Update:Total Tax Benefits Under NPS
According to tax expert Shefali Mundra from ClearTax, the tax benefits available under NPS investment are as follows:
₹1.5 lakh deduction under Section 80C
₹50,000 additional deduction under Section 80CCD (1B)
New ₹50,000 deduction under Section 80CCD (1B) for NPS Vatsalya Scheme investors
With this new provision, old tax regime taxpayers can now save up to ₹2.5 lakh in total tax deductions by investing in NPS schemes.Vrindavan Monkey Exchanges Samsung Phone for Mango Drink, Hilarious Video Goes Viral
