Photo: iStock
Photo: iStock

Tax deduction is available on employer’s contribution to NPS, up to 10% of salary

You can also claim an additional deduction over and above the Rs1.5 lakh cap towards NPS contributions of up to Rs50,000 per annum, under section 80CCD (1B) of the Act

My contributions towards NPS, PPF and children’s tuition fee together comes to about Rs1.6 lakh. Will a further online contribution of Rs50,000 in NPS be exempt under section 80CCD(1B).

—Akram Ali 

You are eligible to claim a tax deduction for contributions to National Pension System (NPS) made by you under section 80CCD of the Income-tax Act, 1961. This deduction is subject to a cap of 10% of your specified salary contributed to NPS (Tier 1 scheme) and is also subject to the overall cap of Rs1.5 lakh per annum permitted for specified investments or expenses under section 80C. You can also claim an additional deduction over and above the Rs1.5 lakh cap towards NPS contributions made by you of up to Rs50,000 per annum, under section 80CCD (1B) of the Act. 

Apart from your contributions to NPS, the income tax Act also provides a tax deduction for an employer’s contribution to NPS capped to 10% of the specified salary. 

I had filed my tax return last year before Aadhaar was made mandatory. If I now want to file an advance tax return, will Aadhaar be mandatory? 

—Rajan Haldar

If you wish to pay advance taxes for the financial year (FY) 2017-18, you will need to deposit taxes using the challan specified within the statutory due dates. Advance taxes are due in four instalments—15 June, 15 September, 15 December and 15 March. The payment of advance taxes will not require filing of a return. But if you are eligible to obtain an Aadhaar, it is mandatory for you to link your Aadhaar to your PAN. Aadhaar has to be quoted in your income tax return for FY 2017-18, when it is being filed. An exception will apply only if you are a foreign citizen or a non-resident or a super senior citizen (i.e., above 80 years of age).

I have bought a showroom with my own money. I have rented the place out and earn a monthly rent on it. I plan to take a loan against the rental income, i.e. Lease Rental Discounting (LRD) loan. This means that the monthly rental generated will be equal to my interest amount. However, I will pocket the entire principal and my rentals will take care of payment of the loan. Will the interest be deducted in my tax return?

—Name withheld on request

We have presumed that you are not in the business of letting out properties. Accordingly, the monthly rentals received from the showroom let out by you will be taxable under the head ‘Income from house property’ under the Indian tax laws. You could claim a deduction towards the municipal taxes paid for the said property and a flat deduction of 30% of the net annual value (i.e., annual rent minus municipal taxes). 

But the deduction for the interest paid on the borrowed capital is allowed only where the loan is availed for the purpose of acquiring , constructing or repairing the property, subject to other specified conditions. Since the loan you are intending to avail is not for any of these purposes, you will not be eligible to avail any deduction for the interest paid on the Lease Rental Discounting Loan when computing your rental income.

Parizad Sirwalla is partner (tax), KPMG.

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