There are various tax benefits available through NPS, and the scheme offers market-linked investment products to help you grow your savings over time.
In her presentation of the Union Budget 2022, Finance Minister Nirmala Sitharaman proposed that, in terms of employer contributions to NPS, there be parity between Central government employees and state government employees.
The Pension Fund Regulatory and Development Authority (PFRDA), established under the PFRDA Act of 2013, administers and regulates the National Pension System (NPS).
“The deduction for employer contributions to NPS increased from 10% to 14% for state government employees, bringing them in line with central government employees,” says Saraswathi Kasturirangan, Partner, Deloitte India.
The state government’s contribution to state government employees’ NPS accounts will now be 14 percent rather than 10 percent in the future.
In cases where the Central Government makes a contribution to the NPS account of central government employees under Section 80CCD, the deduction has been increased from 10% to 14% of salary.
Under Section 80CCD (2) of the Income Tax Act, an employer’s payment to NPS Tier-I is tax-deductible (14 percent of salary for central government employees and 10 percent for others).
This tax benefit is in addition to the maximum set by Section 80C.
Previously, the Central Government increased the employer’s share of contribution for Central Government NPS subscribers from 10% to 14 percent by a notification dated January 31, 2019.
Later, the 14 percent employer contribution rule was extended to Central Autonomous Bodies (CAB) employees as well.
According to the plans in the Budget 2022, the employer contribution for both central government and state government employees will be 14 percent of income, bringing them into parity.
NPS offers numerous tax advantages, as well as market-linked investment funds for the long-term growth of deposits.
Section 80CCD provides a deduction of up to Rs 50,000 for persons who seek to obtain additional tax benefits over and beyond the Rs 1.5 lakh offered under section 80 C. (1B).
Although the deduction allowed under Section 80CCD(1B) is in addition to the deduction allowed under Section 80CCD (1), the same amount cannot be claimed under both sections.
Follow and connect with us on Facebook, LinkedIn & Twitter
