NPS gets more attractive for salaried under new tax regime; deduction under Section 80CCD(2) increased This section allows you to contribute up to 10% of your basic salary to NPS without paying taxes
The budget has encouraged retirement planning by increasing the tax benefit on NPS payments and adding a new option to the pension system for minor children. The deduction under Section 80CCD(2) is planned to be increased from 10% to 14% of the basic pay. This section allows you to contribute up to 10% of your basic salary to NPS without paying taxes. For example, if your basic income is ₹1 lakh, your company can contribute ₹10,000 (10% of basic pay) to the NPS on your behalf, which is tax free. This deduction will increase to ₹14,000.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
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Till now, only government employees were eligible for 14% deduction, but now it has been extended to the private sector. "The NPS proposals in the budget take significant steps towards the government's goal of making India a pensioned society by 2047," says Sriram Iyer, CEO of HDFC Pension.
While the new tax regime offers the NPS benefit only under Section 80CCD (2), the old tax regime allows three deductions under Sections 80CCD (1) (₹1.5 lakh), 80CCD (1B) (₹50,000) and 80CCD (2). However, the higher limit of 14% is only for those who opt for the new tax regime.
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More News"With the employers' contribution increasing to 14%, employees will have extended savings now. This will help in retirement planning, works as an option that is at par with the Provident Fund as per the given limits for employees, and serves an incentive to increase the tax-paying user base for the government," says Dinesh Rohira, CEO & Founder, 5nance.com.
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In the other major step that encourages long-term savings for children by their parents, the budget has announced a new scheme, NPS Vatsalya. Under this, parents and guardians can contribute in the name of minor children below 18. After they turn 18, the plan can be converted seamlessly into a normal NPS account.
"NPS Vatsalya is a notable innovation that allows parents or guardians to contribute to a child's pension from birth, ensuring a strong foundation for future retirement savings through compounded returns," says Iyer.
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This story originally appeared on: India Times - Author:Faqs of Insurances
