New Delhi: There is good news for private sector employees amidst opposition to National Pension Scheme (NPS) and demand for old pensions.
The Pension Regulatory and Development Authority (PFRDA) has said in its proposal that private sector employees will also be given income tax exemption on contributions up to 24 percent in NPS government employees.
Currently, only government employees are given a tax exemption of 24 percent.
According to Financial Express, FRDA has said in its proposal sent to the Finance Ministry that corporate sector employees and
professionals will also be given the benefit of tax rebate on the entire 24% contribution to NPS.
Presently such employees are given tax exemption only on gifts up to 20 percent.
Actually, under NPS, a 10 percent amount is deducted from the basic and DA of the employee, while the employer contributes 14 percent to it.
From the financial year 2019-20, tax exemption is available on the entire 24 percent contribution made to the NPS account of central employees.
In this, 10 percent of the employee and 14 percent of the employer remain.
After this, from April 1, 2022, the scope of this income tax exemption was also extended to the employees of all the states.
But, for private sector employees, this limit was limited to 20 percent, which includes 10 percent of the employee and 10 percent of the employer’s contribution.
Similarly, the scope of tax exemption for professionals is limited to only 20 percent.
The exemption will remain like the PF account
PFRDA Chairman Supratim Bandyopadhyay says that now that the central and state employees are being given tax exemption
on the entire 14 percent contribution made by their employer, the corporate sector employees should also be given this benefit.
With this step, the tax exemption available on NPS will be equal to the PF account.
Currently, 12 percent contribution is made by the employee in the PF account and 12 percent by the employer.
In this way, tax exemption is given on the total amount of 24 percent.
Now tax rebates up to 50 thousand on pensions also
PFRDA has now proposed to give a rebate of 50 thousand in the form of a standard deduction on a pension received under NPS.
Presently, the benefit of a standard deduction of 50 thousand is given on salary during the job, while some employers also provide this benefit on a pension.
But, pension under NPS is offered by third-party service providers. Therefore, this amount is taken as other income, on which the standard deduction’s benefit is unavailable.
PFRDA chairman says that now the employees who buy annuities under NPS should also consider their income as part of their salary and benefit from a standard deduction.
Currently, the Finance Ministry is considering this proposal, and a decision may be taken to extend a 24% tax exemption to private sector employees on NPS.
