Earlier, the tax deductions allowed for the NPS investments were only limited to Rs. 1 lakh. However, the same was amended in the budget of 2015 to encourage more people to invest in pension schemes. Amendments in the sections about NPS were announced in Budget 2015 by Finance Minister Arun Jaitely.
The limit of 1 lakh under Section 80CCD (1) was then increased to Rs. 1.5 Lakh (as per subsection 1A of Section 80CCD). Moreover, a new subsection 1B has been introduced under Section 80CCD to provide an additional deduction of Rs. 50,000 for the contributions made by all individuals assessed towards the new pension scheme. And the additional Rs.50,000 deduction limit is over and above the deduction limit allowed under Section 80C of the Income Tax Act, 1961.
To manage employee benefits efficiently, many companies rely on advanced HRMS software to automate tax treatments like NPS contributions and exemptions.
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