SAVE Tax with new NPS provisions!!!

This article is about NPS (National Pension Scheme) or New Pensions System as some may know, which is a loose-ended replacement of the erstwhile Pension System prevelant in India. Although not a 100% replacement, this is the next best thing, and thus understanding it better is a good idea.

For all those trying hard to save Taxes while working their way around the Indian Income Tax system, the following may help in clarifying doubts / providing more avenues.

As per Income Tax provisions effective in 2015-16, investments in NPS can be done in three ways:

• Employee contribution, under 80C
• Direct investment in NPS (outside of your employer), under 80CCD(1B)
• Employer contribution, under 80CCD(2)

 Let's look at these in more detail:

Employee contribution, under 80C

Any Indian (that has a PRAN) can invest in NPS by contributing to their NPS account by investing a minimum of Rs. 500/- per month or a minimum of Rs. 6000/- annually. This investment into NPS can be deducted from the person's taxable income (subject to a maximum capping of Rs. 1,50,000/- capping under 80C).

Although a good idea, this however, is generally futile since most people (who have been working for a while), have already reached their Rs. 1,50,000/- 80C limit via other means (for e.g. Life Insurance / ULIP / PF etc.). Then investing in NPS is although good in the long-term, however, it does not contribute to saving tax for the current financial year.

Direct investment in NPS (outside of your employer), under 80CCD(1B)

Any Indian (that has a PRAN) can invest directly into NPS, without the support of his / her employer. This facility has been available for a while, and is the oldest form of investing in NPS. Till recently, the caveat to this form of investment was that this did not have any Tax Exemption.

Although modified earlier, as of 2015-16, the Income Tax Provisions are such that investments in NPS (made directly) up to Rs. 50,000/-  can be deducted from the person's Taxable Income. To clarify, this doesn't mean that one can't invest more than Rs. 50k, but that only the first Rs. 50k of that amount can be deducted from his / her taxable income.

For e.g. Lets assume that Ms. Lata's has consumed Rs. 1,50,000/- 80C investment options (via Life Insurance / PF investments) her net taxable income is Rs. 3,75,000/-. Now lets assume that she invested Rs. 1,50,000/- directly to NPS (outside of her employer's assistance), then the next taxable income for her would become Rs. 3,25,000/- (i.e. 3,75,000 - 50,000). So although the entire sum of Rs. 1,50,000 was invested into NPS, only the first Rs. 50,000 was deducted from taxable income.

Employer contribution, under 80CCD(2)

The third and the most unclear & interesting section is the 80CCD(2) that allows an employee to save much more tax than was possible earlier.

Under this section, (apart from the above two clauses), an employee can request his / her employer to deduct a given sum from the monthly salary, and invest in NPS. This contribution (upto a maximum of 10% of Basic Pay) can be additionally deducted from the employee's taxable income, which in some cases can be a big boon to the net tax outflow in the financial year.

Example for all above sections

Lets take an example that elaborates all the sections given above:

Lets assume that Ms. Lata's Basic pay is Rs. 11,00,000 (11 lakh) and she has invested Rs. 1,00,000 in Life Insurance and Rs. 40,000 in ELSS Funds, as well as Rs. 10,000 in NPS (under section 80C). Further, she directly invested (outside of her employer's assistance) invested Rs. 50,000 in her NPS account (under section 80CCD(1B) ). Lastly, she requested her employer to invest Rs. 10,000/- per month in her NPS account under Section 80CCD(2).

Then her net taxable income would be as follows:

Taxable income = 11,00,000 
                   - Rs. 1,50,000 under 80C      - max (1.5 lakh)
                   - Rs.   50,000 under 80CCD(1B)- max (50k)
                   - Rs. 1,10,000 under 80CCD(2) - max (10% of Basic)
               = 11 lakh - 1.5 lakh - 0.5 lakh - 1.1 lakh
               = 7.9 lakh

This should clarify all doubts pertaining to investment in NPS for the financial year 2015-16.

Car transfer between Indian states

After moving to Hyderabad last year, I had to bring my (Delhi Registered) car to Hyderabad for regular day-to-day use. Coupled with the fact that this was a (pretty) old car registered (still) under my dad's name, I had a genuine question as to whether I should get a car re-registered in Hyderabad.

Considering that there is a lot of intra-state movement in India, in part owing to software related employment, I am sure a lot of people are under similar doubts and thought I'd clarify a few things that I found out the hard way.

Some things were learnt by directly talking to the Regional Traffic Office - head (Attapur), some things were learnt by speaking to a few Documentation Agents, and some things purely by doing it:

First, the 'should-dos':

• Plan well before you leave from the source city / state. Its highly under-stated and really helps in saving your time later.
• Get an NOC from the source city / state during this 'planning period'. 
• For e.g. you could get an NOC for Delhi as mentioned here. Other UT / States probably have similar procedures that you could confirm from the local RTO. 
• The NOC would require the RTO office specifics of target city (Hyderabad in my case) and so you should have a rough idea which part of the city you would be staying after movement. So understanding your office location, local rent prices near the office (Housing.com / 99Acres.com could help) would help in estimating which part of the city you'd want to stay
• This decision is important because some large cities (like Hyderabad) have zonal RTOs and all documentary transactions would be done *only* at this RTO zone office. So even if you later find that another zonal RTO is closer to your house, you would *have* to speak to the RTO mentioned in the NOC. So chose wisely, to avoid inconvenience.
• After you have moved to the target city (~first 45 days), keep your car-movement receipt with you at all times. Just like Insurance / PUC etc... this document would allow you leverage in telling a Traffic cop that you've just moved into the City / State. So I got my car moved through a movers-n-packers and kept their bill (with transfer-date clearly visible) along-side car documents for the first month or two.
• Irrespective of who / what my friends said, I was very clear from day one that paying tax meant that I *never* have to hide from any Traffic police official in the middle of the road. To me, traveling with family (for e.g. to a movie) needs to be tension free, and that's one thing I'd recommend you take off your shoulders, despite the cost incurred in paying that tax.
• The decision as to whether I pay the tax, or just sell off the vehicle and buy another one, was further complicated by the fact that I was not the owner (and would have had to call in Dad from another state for any sale / resale).
• Additionally, this was a 12 year old car. The value of reselling such a car, whose owner is in another state, and that isn't registered in Hyderabad (and running on an NOC), is so low, that you'd rather use it for yourself as long as it works, and consider selling off only when its become a burden. Since it hadn't yet become a burden, I was strongly in favour of paying up.
• I went to the zonal RTO (to which the NOC was addressed) and asked how to pay tax. They needed the car's original purchase amount, luckily I had the original (12 years old!) car purchase documents and that meant one less hurdle for me. The older the car, the lesser is the tax, but to a surprise, the road-tax for this 12 year old Santro still came out to be a whopping ~24k. Just because I was clear about the decision, the amount was irrelevant and went ahead with the tax.
• A great realization at the Attapur RTO was that this young chap at the 'May I Help You' help-desk was unique enough to warrant mention. On hind-sight, the only other government office, where I have hence seen such a helpful and sensitive help-desk personnel, was at the DDA Head-Office in Delhi.
• Ironically both help-desk personnel were visually impaired, or as my friend Bharat puts it, blind. (Bharat is one too, and gets extremely irritated when anyone 'sugar-coats' the truth as anything else but 'the-bare-truth', probably I'll narrate his brave fight with the system another day too).
• This man (Attapur office), was utterly focussed in addressing the 'next-guy-in-line', clearly reconfirm the question asked, briefly cross-check in case he has any doubts in the question, and accurately provide a practical solution at hand, which at times meant giving the bad news too.
• To top it, he was also humble enough to accept lack-of-knowledge in specific questions but aptly guided me to the appropriate counter (window) where I could know better.
• Hats off, and I was pleasantly surprised to see such alacrity in serving questions in a Government office.

Some additional info, for those who're keen enough:

• Unofficially, a senior personnel at the Zonal RTO said that earlier the Traffic Personnel were very stringent about Tax documents when catching an out-of-state vehicle. I presume this was mainly because rarely anyone used to pay such a heavy amount, and therefore the cops could ask for a bigger bribe to let the vehicle go. However, off-late a group of Software Professionals approached the State Government ministry to apprise them that the Road-Tax levied, is a lifetime road-tax whereas a good chunk of software professionals in Hyderabad were in for a few years, after which they move on to another city / state / country. Logically, the system should either allow refund of remaining Tax amount (a provision that currently doesn't exist), or the system should allow a shorter Tax-Period (say 3-4 years), which again doesn't exist. Since both options were not on the table, they hinted at resolving this at the Courts. The Government seemingly relented and now (at least unofficially), the Traffic cops have been asked to lay off such cases until a formal settlement / updated rule comes into effect.
• I spoke with another (non-government) Documentation Agent, who (without any financial benefit) advised that I do not go ahead with car re-registration. Since I made it clear that I was Software Professional who didn't plan to stay here more than 3-4 years, he advised that beyond paying up the road-tax, nothing else was recommended. This is because at times, the re-registration process takes upward of 1 - 3 years, mainly because shuffling of papers between two states takes ages. In between this period, if for some reason you need to move to a third state, you are stuck because this process is very difficult to fast-track.
• Additionally, an old friend has been staying with his UP registration number (after paying adequate tax) for the past 5 years in Hyderabad, and has never had any issues, further re-affirming the idea that Re-registration isn't a necessity. The only exception of course is that if you intend to stay on forever, you probably want to re-sell the car away at some time, and its advisable that while you are not in a hurry, let the re-registration process take years, and by the time its time to sell off the car, your papers would have come in.

 All the best, for your learning experience :) !

Christian Marriage Registration (Delhi, India)

(Please scroll down to the read the entire-post to know more)

Documents required for Christian Marriage Registration
(a.k.a. Documents required for Solemnization and Registration of Marriages under Indian Christian Marriage Act, 1872)

Workflow to get your Christian Marriage
Registered with the Delhi Government