Budget 2025 on NPS: The old tax regime will not end, otherwise why would this benefit be given in the budget?

When Finance Minister Nirmala Sitharaman announced tax-free income of up to Rs 12 lakh for those in the new tax regime in Budget 2025, the middle class was overjoyed. But with this, those in the old tax regime were disappointed. But this is not the whole truth of the budget. This time the Finance Minister has also given a gift to those in the old tax regime in the budget. This makes it clear that the old tax regime is not going to end soon in the country.
In the budget, Finance Minister Nirmala Sitharaman has talked about giving the benefit of tax deduction claim on investments made in NPS Vatsalya Yojana. Now those who invest in NPS Vatsalya Yojana. They can avail tax exemption under section-80CCD (1B) of the Income Tax Act.
How to get the tax benefit of NPS Vatsalya?
According to the budget proposals, if you invest in NPS Vatsalya Yojana, then now you will get tax exemption on investments up to Rs 50,000 under section-80CCD (1B) of the Income Tax Act. This means that an annual investment of Rs 50,000 made in NPS Vatsalya will not be a part of your taxable income.
You will get this tax exemption just like the exemption available on a normal NPS account. That is, you will be able to avail of tax deduction only on a total investment of Rs 50,000 by combining both NPS Vatsalya and NPS. This will be in addition to the exemption of Rs 1.50 lakh under section 80C.
The NPS Vatsalya Yojana was introduced by the government in the budget of July 2024. The main objective of this scheme is to provide convenience to grandparents to invest in the name of their grandchildren. However, the government has not made any such special provision in it. If they want, parents can also invest in this scheme in the name of their children for long-term benefits.
The old tax regime will not end!
There is a provision to invest in the name of children in NPS Vatsalya till the age of 18 years. If the government has added tax benefits to it, it simply means that the government wants to promote this scheme and encourage people to invest in this scheme. At the same time, the benefit of different types of tax exemptions is available only in the old tax regime, so now it does not seem likely that the government will end the old tax regime along with bringing a new income tax law in the country.
Finance Minister Nirmala Sitharaman announced at the beginning of her budget speech that the country needs major tax reform. The government will introduce a new income tax bill in the budget session next week.
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