Higher income tax deduction on NPS for State govenment employees
As per the income tax tax rules, when an employer contributes towards the employee's NPS account, then only a certain percentage of salary will be qualified for deduction under Section 80 CCD (2).
The new proposal from Pension Fund Regulatory and Development Authority PFRDA to government is to make employer's contribution of 14% under National Pension Scheme tax free for all categories of subscribers. At the present condition, this limit is applicable to Central government employees only.If employer is contributing towards the employee's National Pension Scheme , a deduction up to a certain percentage of salary (basic + DA) irrespective of any limit qualifies for income tax deduction under Section 80 CCD(2).
Pension Fund Regulatory and Development Authority also recommends government to extend the benefit of tier-II NPS account as tax free for all subscribers. At the present situation, Central government employee's contribution towards Tier-II account of NPS for availing income tax deduction with a max limit of up to Rs 1,50,000 per year will have a lock-in period of 3 years.
Year 2019-20 Budget , the government had proposed to separate the NPS Trust from the pension regulator. PFRDA expects to begin this process for separating NPS Trust in the next financial year.
