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Budget 2023 | Experts want govt to hike NPS contribution to 14% for private sector employees

Budget 2023 | Experts want govt to hike NPS contribution to 14% for private sector employees

Budget 2023 | Experts want govt to hike NPS contribution to 14% for private sector employees
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By Anshul  Jan 25, 2023 4:19:30 PM IST (Published)

National Pension System (NPS), operated under National Pension System Trust, is a government-run investment scheme that gives the subscriber the option to set the preferred allocation to different asset classes. Here's what experts want from Budget

As the Budget 2023 nears, the salaried class is expecting some major announcements that can reduce their tax burden. One such anticipation is increasing the limit of National Pension System (NPS) for private employees to 14 percent to match with that of government employees. Experts say that will help private sector employees in planning their retirement.

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Currently, central and state government employees are eligible for the enhanced deduction of 14 percent of basic salary on employer contributions to NPS under section 80CCD (2) of the Income-tax Act. However, the limit for private sector employees is only 10 percent. Analysts say that private-sector employees may be less motivated to choose NPS as a retirement investment option due to lower limit.
"Increasing the limit will allow private-sector employees to benefit from NPS and encourage them to contribute to social security. Increasing the limit will also encourage citizens to accumulate long-term corpus for retirement," experts say.
Initially, the limit of 14 percent was available only for central government employees and was extended for state government employees only in Budget 2019.
About NPS
National Pension System (NPS), operated under National Pension System Trust, is a government-run investment scheme that gives the subscriber the option to set the preferred allocation to different asset classes.
NPS offers two kinds of accounts — Tier 1 and Tier 2 — for instruments including government bonds, equity market, and corporate debt. While the Tier 1 NPS account is strictly a pension account, the Tier 2 account — known as an investment account — is voluntary savings account associated with the Pension Regulatory Authority of India (PRAN).
In NPS, a subscriber can contribute at any point of time in a financial year and also change the amount he/she wants to set aside and save every year. Subscribers can choose their own investment options and pension fund and see their money grow.
This investment avenue is portable and subscribers can operate their account from anywhere, even if they change the city and/or employment.
NPS is regulated by PFRDA, with transparent investment norms and regular monitoring and performance review of fund managers by NPS Trust.
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