Union Budget 2022 for NPS: Finance Minister Nirmala Sitharaman while presenting the Budget 2022 has proposed to bring parity between the Central government employees and the state government employees as far as employer’s contribution to NPS is concerned. The National Pension System (NPS) is being administered and regulated by the Pension Fund Regulatory and Development Authority (PFRDA) set up under the PFRDA Act, 2013.
“Deduction for employer contribution to NPS increased from 10% to 14% for state govt employees on par with central govt employees, but not extended to non-govt employees,” says Saraswathi Kasturirangan, Partner, Deloitte India.
Going forward, the contribution made by the state government into the NPS account of state government employees will also be 14 per cent instead of 10 per cent.
The deduction for NPS contribution was increased to 14 per cent from 10 per cent of salary in case the contribution is made by the Central Government in NPS account of central government employees under Section 80CCD.
Employer’s contribution towards NPS Tier-I is eligible for tax deduction under Section 80CCD (2) of the Income Tax Act (14% of salary for central government employees and 10% for others). This tax benefit is over and above the limit prescribed under Section 80C.
Earlier, through a notification dated 31st January 2019, the Central Government had enhanced the employer’s share of contribution for Central Government NPS subscribers from 10% to 14%. Later on, the 14% employer’s contribution rule has now been extended for employees of Central Autonomous Bodies (CABs) as well.
Now, as per the Budget 2022 proposals, the employer’s contribution for both central government employees and state government employees will be 14 per cent of salary thus bringing parity between them.
There are tax benefits galore in NPS and the scheme provides market linked investment funds to grow savings over the long term. For those who wish to take additional tax benefit over and above Rs 1.5 lakh available under section 80 C, the deduction up to Rs 50,000 exists under Section 80CCD(1B). The deduction under Section 80CCD(1B) is over and above the deduction availed under Section 80CCD(1), however, the same amount cannot be claimed under both the sections.