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December 6, 2022

Source: financialexpress.com

Contribution to National Pension System (NPS) account qualifies for deduction under Section 80 CCD of the Income Tax Act for both State and Central Government Employees

Contribution to National Pension System (NPS) account qualifies for deduction under Section 80CCD of the Income Tax Act for both State and Central Government Employees. Before Finance Act 2022, any contribution over 10% of salary to the NPS account of state government employees was taxable. In the case of Central Government Employees, there was no tax on contributions up to 14%. The Finance Act 2022 has ended this discrepancy.

The Central Board of Direct Taxes (CBDT) recently issued explanatory notes on the provisions of the Finance Act 2022, which explains how the tax treatment of NPS contribution is now the same for both state and Central Government Employees. This article looks at what the CBDT has said:

“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,” CBDT said.

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