Budget 2024: Increase in Deduction for Employer Contribution to NPS
The much-awaited Union Budget 2024 was presented in Parliament on 23rd July by the Finance Minister. Among the various proposals, a significant change was announced regarding taxation, including an increase in the limit of standard deduction and changes in the new tax regime slab rate. Let’s delve into one particular proposed change regarding the deduction for employer contributions to a pension scheme.
Enhanced Deduction for Employer Contribution to NPS
Under Section 36 of the Income Tax Act, deductions are allowed for computing income under ‘Profits and Gains of Business or Profession’. Clause (iva) of sub-section (1) of this section allows an employer to claim a deduction for contributions made to a pension scheme on behalf of an employee. The current limit for this deduction is set at 10% of the employee’s salary in the previous year.
The proposed amendment seeks to increase this limit from 10% to 14% of the employee’s salary, thereby providing more tax benefits to non-government employers and their employees.
Additionally, Section 80CCD deals with deductions for contributions to the pension scheme of the Central Government. Sub-section (2) of this section allows deductions for contributions made by the Central Government, State Government, or any other employer, up to certain limits based on the employee’s salary.
The proposed modification aims to increase the deduction limit for contributions made by employers other than the Central or State Government to 14% of the employee’s salary. This change will apply specifically to cases where the employee’s salary is taxable under section 115BAC of the Act.
These amendments will come into effect from 1st April 2025, and apply for the assessment year 2025-2026 onwards. Stay updated with StudyCafe Membership for more information and updates on government jobs, income tax, GST, and much more. Join our WhatsApp group or Telegram channel for the latest updates.and add some rlated instagram viral hashtags in the end