Deduction under Sec 80CCD increased to 14% for state govt. employees



Quick Summary
State government employees will now benefit from an increased deduction limit for their National Pension System (NPS) contributions. The deduction under Section 80CCD has been raised from 10% to 14% of their salary, aligning it with the limit for central government employees. This change, effective retrospectively from April 1, 2020, aims to prevent any additional tax liability for contributions made above the previous 10% limit.

Incentives to National Pension System (NPS) subscribers for state government employees

1. 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

NPS Deduction for State Govt Employees Increased to 14

2. In order to ensure that the State Government employees also get 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 percent to fourteen percent 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.

 

[Clause 20]

 



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I write informative articles on taxation, GST, TDS/TCS compliance, corporate laws, EPF, government schemes, and finance-related topics. My focus is on simplifying complex legal, tax, and compliance matters into practical and easy-to-understand guides for professionals, businesses, and general readers.

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