Appeal to increase tax exemption limit in NPS, private sector employees expected to benefit

Budget Expectations 2024: The central government can make several announcements in the full budget to provide relief to the members of the National Pension Scheme. Under which the limit of tax exemption on NPS contribution can be increased to 12 percent. Which is currently 10 percent. Finance Minister Nirmala Sitharaman will present the budget on July 23. Pension Fund Regulator PFRDA had proposed to the government to increase the tax exemption limit this year. There should be equal opportunities in terms of tax for companies and employers contributing to NPS from EPFO. There is inequality at present.

In NPS, 10% tax exemption is available on basic salary and dearness allowance, while in case of EPFO ​​it is 12%. In case of government employees, this limit is 14%. Experts say that the government can consider this proposal of PFRDA.

This modification is also possible

Currently, the additional benefit related to voluntary contribution of Rs. 50 thousand under section 80 CCD (1B) is applicable only to the old tax system. The government can also consider allowing deduction under the new tax system. This will fulfill two objectives of the government. First – taxpayers will get the benefit of additional deduction under the new tax system, second, the government's objective of promoting the new tax system is to increase investment in pension schemes.

Private sector employees will benefit a lot

Currently, the employer and employee contribution to the EPF account is 12 percent. On which tax exemption is available. Only 10 percent of the private sector contribution to NPS is tax free. PFRDA has recommended increasing this exemption limit to 12 percent. Experts believe that if the government increases the employer contribution limit in NPS, the difference between private sector employees and government employees will end. Along with this, the way will also be cleared for private employees to create a good fund for retirement. Employees and employers opting for the new pension scheme will also get the benefit of 12 percent tax relief.

One more hope

On the tax front too, the working class is expecting an increase in the exemption limit under standard deduction. Currently, an exemption of Rs. 50 thousand is applicable under standard deduction. There has been no change in the slabs and rates of the old tax system since 2014. Taxpayers are expecting relief. To make the new tax system attractive, deduction can be availed on premium payment of mediclaim.