I had made an online contribution to National Pension System (NPS) on March 29, but it got reflected in the NPS account statement only on April 4, which means the contribution is for the financial year (FY) 2022-23. Since my bank account was debited during FY2021-22, will I get Income Tax (IT) exemption under section 80 for FY2021-22?
—Ravichandran
As per the provisions of the IT Act of 1961, a person employed by the Central Government (on or after 1st April 204) / any other employer or any other individual tax payer, who has paid or credited any amount to his account during the financial year Will be eligible for deduction (up to specified amount) in computing income for notified pension schemes (including NPS).
Based on the literal reading of the provisions, it appears that the deduction may be allowed to the individual in the year in which the amount is paid or credited to his NPS account. Accordingly, in your case, as the amount has been paid/contributed to your NPS account as on March 29, 2022, deduction should be allowed for the financial year 2021-22.
However, in the absence of any specific instruction/clarification, the same may be scrutinized by the tax authorities, which may subsequently need to be certified on the basis of the above provisions and proof of payment, i.e. debit of the amount paid and 29 Contribution receipt generated for March 2022.
I am a Central Government employee and my taxable income comes under the basic exemption limit (less than Rs. 5 lakhs). However, I have received 6,000 as prize money from my university for academic performance. How do I report this additional income?
– Name withheld on request
Assuming that you are below 60 years of age, as per the provisions of the IT Act 1961, the maximum amount applicable in your case is not applicable for tax (basic exemption limit) 2.5 lakhs. However, please note that the taxable income of a person resident in India is up to 5 lakh, tax relief under section 87A of the Act (up to . 12,500) is available due to which no tax liability needs to be deposited if the taxable income is up to 5 lakhs.
Since the award money from the State University is not in the nature of any scholarship given to meet the cost of education, the amount received will be taxable in your hands as “Income from other sources”.
If your total taxable income (including prize money) does not exceed 5 lakhs, then there will be no tax liability. If your total taxable income exceeds 5 lakh, the relief under section 87A will not be available and you will have to pay taxes as per the applicable slab rates (which will depend on your choice of tax regime i.e. old tax regime or new tax regime). In either scenario, if the taxable income exceeds, you will need to file a return of income 2.5 lakhs.
Parizad Sirwalla is Partner and Head, Global Mobility Services, Tax, KPMG in India.