Tax deduction: Employees can save more tax by contributing to Corporate NPS, know how
In the new regime, deduction is available on employer’s contribution up to 14% (basic pay and dearness allowance) in the employee’s NPS account. In the old regime, its limit is 10%. However, in the case of government employees, deduction is already available on contribution up to 14%
Tax deduction: In the Union Budget 2025, the government made several big announcements to increase the attraction of the new income tax regime. Chartered accountants say that this has increased people’s interest in corporate NPS. In the new regime, taxpayers get only a few deductions. These include the deduction available on corporate NPS. Now, under section 80 CCD (2) of the Income Tax, deduction has started being available in both the new and old regimes on the employer’s contribution to the employee’s NPS account. But, there is a big difference between the new regime and the old regime in this matter. Let us know about this in detail.
More deduction in corporate NPS in the new regime
In the new regime, deduction is available on the employer’s contribution up to 14 percent (basic pay and dearness allowance) in the employee’s NPS account. Its limit in the old regime is 10 percent. However, in the case of government employees, deduction is already available on contributions up to 14 per cent. The decision to deduct up to 14 per cent of the employer’s contribution in the new regime was taken in the Union Budget 2024. This means that taxpayers using the new regime can now avail this deduction available in NPS.
No deduction of additional Rs 50,000 in new regime
In the new regime, if the employee contributes up to 14% (10% in old regime) (basic salary plus DA) to his NPS account, then he will be entitled to deduction under section 80CCD (1). For this, the limit of Rs 1.5 lakh already fixed under section 80C will be applicable. In the old regime, an additional deduction of Rs 50,000 is available on contribution to NPS under section CCD (1B). This additional deduction is not available to taxpayers in the new regime. In the new regime, deduction is available only on employer’s contribution of up to 14% (basic plus DA) to the employee’s NPS account.
This is how you can make more tax savings in the new regime
Even though the government has increased the deduction on employer’s contribution to NPS to 14% in the new regime, employees do not show interest in this due to lack of information. The reality is that if employees show interest in this deduction of NPS in the new regime, then they will make a lot of tax savings. According to the calculations of taxmen, if an employee uses corporate NPS, then his annual income of up to Rs 13.5 lakh will become tax-free in the new regime.
Private sector employees can invest in NPS and EPF simultaneously
Resident Indians, NRIs and Overseas Citizens of India (OCI) can avail the benefit of Corporate NPS. For this, they have to convince their employer to contribute to their NPS account. If you already invest in NPS, then you can give Permanent Retirement Account Number (PRAN) to your employer. You can convince him to contribute to the NPS account. A person working in the private sector can contribute to both NPS and EPF.
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