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#Budget2022: Tax Benefit on Employer’s NPS Contribution Increased to 14% for State Employees

The Finance Minister Nirmala Sitharaman today presented the Union Budget 2022 and announced a hike in the tax exemption limit on the employer’s NPS contribution for State Employees from FY 2022-23 onwards. Currently, this tax benefit is available to the State Employees at 10%, Central Employees at 14%, and Private Employees at 10%.

What is the National Pension System (NPS)?

National Pension System (NPS) is a pension cum investment scheme launched by Government of India to provide financial security to Citizens of India during their retirement. The contributions made towards the NPS are invested in various market-linked instruments i.e equity and debt securities. The Scheme is regulated by Pension Fund Regulatory and Development Authority (PFRDA).

You Can Also Read: All You Need To Know About NPS Registration And Login Process

An NPS account can be opened by any Indian citizen aged 18 to 60 years. An NPS account matures at the age of 60, however, can be extended until the age of 70 years.

There are two types of NPS accounts - Tier I and Tier II.

  1. Tier I NPS Account - Contributions made towards this account are eligible for a tax deduction of up to Rs 1.5 Lakh per annum under Section 80C of the Income Tax ACt and an additional amount of up to Rs 50,000 per annum under Section 80CCD (1B). However, no premature withdrawals are not allowed under this account.
  2. Tier II NPS Account - This account can be opened only by the subscribers of Tier I NPS account. It is a voluntary account which helps you save for your retirement. Withdrawals can be made anytime under this account, however, tax benefits can be availed only after the completion of a lock-in period of 3 years. No tax deductions are available for private-sector employees or self-employed persons under this account.

Read More Suggestions: Know All About National Pension Scheme Tax Benefits

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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