Incentives to National Pension System (NPS) subscribers for state government employees
Under the existing provisions of the Act, any contribution by the Central Government or any other employer to the account referred to in section 80CCD of the Act (NPS account), shall be allowed as a deduction to the assesses in the computation of his total income, if it does not exceed 14% of his salary where such contribution is made by the Central Government. This limit is presently 10% of his salary where such contribution is made by any other employer.
The State Governments were given an option to raise the contribution to 14% w.e.f 01.04.2019 on their own volition, based on their own internal approvals and notifications, without seeking the approval of the Pension Fund Regulatory and Development Authority
2. In order to ensure that the State Government employees also get a full deduction of the enhanced contribution by the State Government, it is proposed to increase the limit of deduction under section 80CCD of the Act from the existing ten per cent to fourteen per cent in respect of contribution made by the State Government to the account of its employee.
3. This amendment will take effect retrospectively from 1st April 2020 and will accordingly apply in relation to the assessment year 2020-21 and subsequent assessment years; so as to ensure no additional tax liability arises on any contribution made in excess of 10% during such time.
As the amendment is retrospective in nature and tax may have already been deducted from the state government employees in ay 2020-21 and 2021-22 and returns have also been filed so to claim the benefit of the amendment employees have to file rectification u/s 154 with assessing officer referring this amendment.
Though we welcome this provision but this injustice with the employees of the Public sector Undertaking employees. as they are following state government policies and such public sector undertakings are also contributing 14% also a contribution towards NPS of the employees. We deemed from govt to consider such PSU employee at par with state government and central government employees.