Budget 2022: Will NPS subscribers get these additional deduction limit from FM?
Budget 2022: Will NPS subscribers get these additional deduction limit from FM?
Budget 2022 expectations for NPS: National Pension System has emerged as a popular investment scheme for retirement. 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). However, an increase in the limit could help taxpayers to reduce their tax burden further. Finance Minister Nirmala Sitharaman may provide additional deduction limits in NPS in Budget 2022. “An enhancement of the additional deduction limit provided in NPS contributions from Rs 50,000 to Rs 1,00,000 under Section 80CCD(1B) is expected,” says Raghunathan Parthasarathy, Associate Partner – Tax & Regulatory Services, BDO India.
As per Section 80CCD(1B), the taxpayer either employee or self-employed, is allowed a deduction on the amount contributed towards NPS up to Rs 50,000. 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.
Another key change in NPS could be expected in the contribution being made by the employers in the NPS account of employees. Earlier, the contribution limit by the government into the NPS account of employees was raised from 10 per cent to 14 per cent. “The deduction for NPS contribution was increased to 14% of salary in case the contribution is made by the Central Government under Section 80CCD. However, no corresponding amendment is made to allow deduction to the employer. Hence, the amendment to allow a deduction up to 14% for employers as well may be introduced in Budget 2022,” adds Parthasarathy.
For a government employee, the monthly contribution will be 10 per cent of the basic pay plus DA while that of the central government, it will be 14 per cent of the basic pay plus DA. 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.