Tax benefit on a fixed percentage of income

Under section 80CCD(2), Employer’s contribution to NPS account, the exemption value is 10% of salary/income of the employee.

Salary in this case is Basic plus DA.

Salary must be mapped to the Basic and DA(if applicable) under Etds mapping fields.

So 10% of Basic+DA of an employee salary will be exempted at the maximum. This will differ from employee to employee as the Basic will vary.

Lets see how to define this criteria:

First create the Exemption group and section with name “Employer’s Contribution to NPS Account”.

Go to TDS settings, under deductions table, select the group against the section and add the below formula under formula column.

TDS_SalaryMapped*0.1

Below is the screenshot for reference.

As per the definition, straight away 10% of the employees annual basic income will be exempted for TDS.

EX: Lets say employee Basic salary is 115051 per month.

Per annum it will be 115051*12=1380612

So 10% of it is 138061/- is the exemption value and the same will be displayed in the Tax computation sheet against the section 80CCD(2) as shown below.

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