look news india
The Union Budget has announced an increase in the deduction for employer's contribution to the National Pension System (NPS). It has been raised from 10% to 14% of the basic salary of employees. This change will apply to both public and private companies in the new tax regime. Government employees already get a deduction of up to 14% on employer's contribution.
In the new system, deduction is only 14% of contribution
Deduction in NPS under section 80CCD (2) is available in both the old and new tax regimes. However, the deduction on 14% employer's contribution will be available only in the new income tax regime. In her budget speech, Finance Minister Nirmala Sitharaman said, “In order to enhance social security benefits, it is proposed to increase the deduction on employer's contribution to NPS from 10% to 14% of the employees' salary.” This means that taxpayers using the old regime will be able to avail the deduction only on 10% of the employer's contribution (of basic salary).
NPS is a government retirement scheme
National Pension System i.e. NPS is a government retirement benefit scheme. Apart from people working in private companies, common people can also invest in it. When the subscriber turns 60, he gets regular pension from this scheme. Under this scheme, the subscriber's contribution is invested in different types of assets. The subscriber can use low risk and high risk investment options according to his risk taking capacity.
Interest in NPS will increase after the announcement in the budget
There are two types of accounts in NPS – Tier 1 and Tier 2. Tier 1 is a pension account, which focuses on retirement savings. Tier 2 is a voluntary savings account. Experts say that the increase in deduction on employer's contribution in NPS by the Finance Minister has increased the attractiveness of this scheme. Now private sector employees can show more interest in this scheme.
