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New Delhi: To make the New Pension Scheme (NPS) more attractive under the new tax regime, Finance Minister Nirmala Sitharaman on Monday proposed to increase tax deductions for employers contribution to 14 percent from 10 percent.
The minister also proposed to start 'NPS-Vatsalya', a plan for contribution by parents and guardians for minors.
On attaining the age of majority, the plan can be converted seamlessly into a normal NPS account.
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 percent to 14 percent of the employee's salary.
Similarly, a deduction of this expenditure of up to 14 percent 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 percent 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.
Giving example, she said any individual with a basic salary plus dearness allowance of Rs 1,00,000 per month may now be eligible to claim an additional deduction of Rs 4,000 per month/ Rs 48,000 per annum for employer's contribution to NPS and save annual tax of Rs 14,976.
EY India, Tax Partner and National Leader, (People Advisory Services) Sonu Iyer said the proposal to increase tax deduction will make NPS more popular.
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