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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Retirement Products

Caselet: Arvind, a salaried employee, contributes ₹50,000 in a year to his own NPS Tier I account, over and above any employer contribution. Assume he opts for the old tax regime and has already fully used the ₹1.5 lakh limit under Section 80C. He falls in the 30% tax bracket (ignore cess). What is the additional tax saved from the own NPS contribution under the specific additional deduction for NPS available beyond the 80C limit?

The tax saved is ₹15,000. Under the old regime, own NPS contributions up to ₹50,000 qualify for an additional deduction beyond the 80C limit. At a 30% marginal rate, ₹50,000 multiplied by 30% gives ₹15,000, ignoring cess.

  1. A₹15,000Correct
  2. B₹7,500
  3. C₹0
  4. D₹25,000

Explanation

Under the old regime, an additional deduction of up to ₹50,000 is available for own NPS contributions under Section 80CCD(1B), over and above the 80C limit. The deduction is ₹50,000 and tax saved is 30% × 50,000 = ₹15,000. ₹7,500 uses 15%, ₹0 ignores the extra deduction, and ₹25,000 applies a 50% rate.

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