Budget 2024: Tax relief sought for employers' NPS contributions up to 12% of basic salary

“We have made a case for bringing the tax benefits on employers’ NPS contribution at par with the employees’ provident fund (EPF) contribution limit of 12 percent,” he was quoted as saying by Moneyconrol.

At present, this limit is up to 10 percent of contributions for subscribers enrolled under private sector individual (All-citizens' model) and corporate schemes.

Under the EPF rules, employee and employer contributions can go up to 12 percent for basic salary and dearness allowance, if any.

“The aspiration is 14 percent – in line with what the government employees get – but we hope that it will be brought at par at least with EPF to start with,” Mohanty said on the sidelines of a media meet in Mumbai, the Moneycontrol report said.

Employees have the opportunity to avail of tax benefits on their employers' contributions, which can go up to 10 percent of their wages, as per section 80CCD (2), regardless of the chosen tax regime.

It's worth noting that the total tax benefits on employers' contributions across retirement schemes are limited to Rs 7.5 lakh annually.

Furthermore, individuals can also claim tax deductions under section 80CCD(1) for their own NPS contribution, capped at 10 percent of their salary (within the overall 80C limit of Rs 1.5 lakh).

Further, there is an extra deduction of up to Rs 50,000 available under section 80CCD(1B).

The PFRDA has established a goal to enroll 13 lakh corporate and individual subscribers (under the all-citizens' model) in the financial year 2023-24, according to the report.

Although the NPS ecosystem has gained over 5 lakh subscribers this year, the regulator is optimistic about the last three months of the financial year.

This period typically attracts a significant number of subscribers aiming to make tax-saving investments. The assets under management (AUM) across various subscriber categories have now reached Rs 11 lakh crore, as stated by Mohanty.

The NPS subscriber base covers government employees and Atal Pension Yojana (APY) subscribers, experienced a 16 percent growth.

The numbers increased from 6.06 crore in December 2022 to 7.03 crore in December 2023.