Union Budget 2022: Tax deduction limit on employer’s contribution to NPS a/c of State govt employees hiked from 10% to 14%

FM Sitharaman announced parity between employees of State and Central government by hiking Central Government contribution to the National Pension System (NPS) Tier-I.

New Delhi: Finance Minister Nirmala Sitharaman on Tuesday hiked Tax deduction limit on employer’s contribution to the NPS account of State government employees from 10 percent to 14 percent.

Announcing Parity between employees of State and Central government, FM Sitharaman said, at present, the Central Government contributes 14 percent of the salary of its employee to the National Pension System (NPS) Tier-I. This is allowed as a deduction in computing the income of the employee. However, such deduction is allowed only to the extent of 10 percent of the salary in case of employees of the State government.

"To provide equal treatment to both Central and State government employees, I propose to increase the tax deduction limit from 10 per cent to 14 per cent on employer’s contribution to the NPS account of State Government employees as well. This would help in enhancing the social security benefits of the state government employees and bring them at par with central government employees."

The FM has also announced tax relief to persons with disability. FM said that the parent or guardian of a differently abled person can take an insurance scheme for such person. 

"There could be situations where differently abled dependants may need payment of annuity or lump sum amount even during the lifetime of their parents/guardians. I propose to thus allow the payment of annuity and lump sum amount to the differently abled dependent during the lifetime of parents/guardians, i.e., on parents/ guardians attaining the age of sixty years," she said.