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Budget 2024: NPS Deduction for Employers increased from 10 to 14 Percent


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In the Union Budget 2024, a significant change has been introduced regarding the National Pension System (NPS) contributions made by employers. The deduction allowed on employers’ NPS contributions, based on employees’ basic salary, has been increased from 10 percent to 14 percent.

Applicability of the Increased Deduction

This revised deduction applies to both public sector and private sector companies under the new, simplified tax regime. Government employees, who already benefit from a 14 percent deduction, will continue to receive this higher rate. The deduction is available under Section 80CCD(2) in both the old and new tax regimes, but the enhanced rate of 14 percent is specifically applicable only under the new, simplified tax regime.

Benefits for Employers

Employers will also experience similar benefits from this adjustment. Finance Minister Nirmala Sitharaman highlighted in her Budget speech that to enhance social security benefits, the deduction for employer contributions towards NPS is proposed to be increased from 10 percent to 14 percent of the employee’s salary.

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