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]

 

FAQ :

The deduction limit for NPS contributions made by state governments to their employees' accounts under Section 80CCD has been increased to 14% of the employee's salary.

This amendment is effective retrospectively from 1st April, 2020.

The change applies to the assessment year 2020-21 and all subsequent assessment years.

The previous deduction limit for contributions made by employers other than the Central Government was 10% of the employee's salary.

The increase is to ensure that state government employees also receive the full benefit of the enhanced contribution by the state government, preventing additional tax liability.




About the Author

Professional

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.

Click here to Login and post comments    OR


Related Articles


Loading


Popular Articles





CCI Pro

CCI Articles

submit article


Company
ARTICLESHIP 15 July 2026
CA Articles

Kinjal H Shah & Co.

Mumbai

CA Foundation

View Details
Company
ARTICLESHIP 08 July 2026
Article internship

AJAY SINGH AND CO LLP

Thane

CA Final

View Details
Company
06 July 2026
Accountant

Agarwal Anoop and Associates

Noida

CA Final

View Details
Company
ARTICLESHIP 16 July 2026
CA Article

Pipara & Co. LLP.

Mumbai

CA Inter

View Details
Company
ARTICLESHIP 07 July 2026
Articleship

Jawahar and Associates Chartered Accountants

Hyderabad

CA Inter

View Details
Company
ARTICLESHIP 16 July 2026
Article Assistant

G A R U D & Associates

New Delhi

CA Inter

View Details
Company
20 July 2026
Senior GST Executive

Chandak Agarwal & Co

Mumbai

Graduate (Any)

View Details
Company
16 July 2026
Manager - Finance & Accounts

Aliens Group

Hyderabad

CA Final

View Details
Follow