Deduction For NPS Allowed Under Overall Limit Of Rs 1.5 Lakh With Extra Rs 50,000 Under 80CCD

Can I claim tax benefits for contribution to the National Pension System (NPS) under Section 80CCD of the Income-tax Act, 1961 without exhausting the limit available under Section 80C? Can I claim NPS contribution under Section 80C itself?

There is an overall limit of Rs. 1.50 lakh prescribed under Section 80CCE for Section 80C, 80CCC and 80 CCD (1) taken together.  

Section 80C covers various expenses and investments, whereas Section 80CCC covers payments made for premium for annuity purchased. Deduction under Section 80CCD (1) is available for contributions made by the taxpayer for NPS.  

Section 80CCD (1B) provides for an exclusive deduction of Rs. 50,000 not covered under Section 80CCE. In case you have exhausted the limit of Rs. 1.50 lakh with or without NPS contribution, you can claim an additional deduction under Section 80CCD (1B) up to Rs. 50,000 every year for contribution made for NPS.  

So you can claim deduction for NPS contribution under Section 80CCD (1) read with Section 80C as long as the overall amount does not exceed Rs. 1.50 lakh. If the overall eligible amount of deduction including NPS contribution exceeds this threshold of Rs. 1.50 lakh, the excess contribution of NPS can be claimed under Section 80CCD (1B). Do note that deduction under Section 80CCD is available only in respect of contribution made to Tier-I account under NPS. Deduction under Section 80C is available to only employees of central government towards contribution made towards Tier-II account of NPS.

I have made a long term capital gain (LTCG) of Rs. 9 lakh on property sold in the month of April 2023. My parents are gifting me an old property. Will I be permitted to claim exemption under Section 54 for money spent in reconstructing a new house on the gifted property?

Exemption under Section 54 of the Income-tax Act, 1961 is available in respect of LTCG earned on sale and/or transfer of a residential house if the taxpayers reinvests the indexed capital gains for purchase or construction of a house within the prescribed time frame.  

Since you are planning to construct a new house on the house received by you as a gift, you would be eligible to claim deduction in respect of cost incurred for constructing the new house.  

Do note that while computing the eligible amount of exemption, the cost of land will not be taken into account, as you have not incurred any cost for it. Construction of the house has to be completed within three years from the date of sale of your house.

In case you are not able to utilise the amount required to be invested by the due date of filing of your income tax return, i.e., July 31, 2024, the unutilised money has to be deposited in a capital gains account to be opened under Capital Gains Account Scheme by July 31y, 2024. This money can be used for making payment for construction of the house. 

I am a salaried employee. I am currently staying on rent in Bangalore. I am planning to buy a house. Can I avail of both house rent allowance (HRA) and home loan benefits if I continue to stay in the rented house and let out the home that I purchase?  

Yes, you can claim both HRA benefits and home loan benefits as long as you satisfy the relevant conditions. For claiming the HRA benefits you must be in receipt of an HRA from your employer and must be paying rent for the property occupied by you and which is not owned by you.  

For being eligible to claim the benefits of home loan you should be an owner or co-owner of the house as well as borrower or co-borrower and be servicing the home loan, too. 

In case you satisfy these conditions, you would be eligible to claim the home loan benefits under Section 80C (for repayment of principal amount of home loan) and Section 24(b) for payment of interest. 

In respect of the let-out property, you are entitled to claim a standard deduction of 30 per cent of the rent received. From the net rent, you are allowed to claim full amount of interest, but loss under the house property head can be adjusted against other income only up to Rs. 2 lakh in a year, and the unabsorbed loss has to be carried forward for set-off against house property income in next eight years.  

The author is a tax and investment expert

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)