New Tax Regime Taxpayers To Get Extra NPS Benefits,
New Tax Regime Taxpayers To Get Extra NPS Benefits,
NPS In New Tax Regime: To make the New Pension Scheme (NPS) more attractive under the new tax regime, Finance minister Nirmala Sitharaman proposed increasing tax deductions for employers’ contributions to 14 per cent from 10 per cent.
In her 2024-25 Budget speech, Sitharaman said to improve social security benefits, the deduction of expenditure by employers towards NPS is proposed to be increased from 10 per cent to 14 per cent of the employee’s salary.
Similarly, a deduction of this expenditure of up to 14 per cent of salary from the income of employees in the private sector, public sector banks and undertakings, opting for the new tax regime, is proposed to be provided.
Explaining the provision, BDO india Partner (Global Employer Services, Tax & Regulatory Services) Preeti Sharma said an additional deduction of 4 per cent of basic salary is provided towards the employer’s contribution to NPS for employees working with the private sector and public sector banks and undertakings and have opted for the NTR.
EY india, Tax Partner and National Leader, (People Advisory Services) Sonu Iyer said the proposal to increase tax deduction will make NPS more popular.
Prashant Shah, Co-founder of TeamNest.com, highlighted that the proposed increase is a significant step towards enhancing retirement security.
“This change allows employees to accumulate a larger retirement corpus, ensuring greater financial stability in their post-retirement years. The enhanced employer contribution of 14% also means that employees benefit from increased retirement savings without any additional personal cost,” Shah added.
Moreover, the higher NPS contributions come with substantial tax benefits, reducing the taxable income and lowering the overall tax liability. This initiative not only strengthens the social security net but also makes the NPS more attractive for employees in the private sector, public sector banks, and public sector undertakings, Shah said.
The finance minister also proposed to start ‘NPS-Vatsalya’, a plan for contributions by parents and guardians for minors.
On attaining the age of majority, the plan can be converted seamlessly into a normal NPS account.