Last Updated on July 25, 2024 at 6:03 pm
There were three proposals related to the National Pension Scheme in Budget 2024. A discussion.
1. The finance minister said, “The Committee to review the NPS has made considerable progress in its work. I am happy that the Staff Side of the National Council of the Joint Consultative Machinery for Central Government Employees have taken a constructive approach. A solution will be evolved which addresses the relevant issues while maintaining fiscal prudence to protect the common citizens”.
This was a reference to the demand for 50% of last drawn pay for central government staff who are NPS subscribers. The refernce in the budget speech indicates some sort of compromise is close at hand. We will have to wait and see what this is. Read more: 50% NPS pension for central govt staff? Is it enough for retirement?
2. The budget documents state, “Non-government employer contribution to New Pension scheme: It is proposed to increase the amount of deduction allowed to an employer in respect of his contribution to a pension scheme referred to in section 80CCD, from the extent of 10% to the extent of 14% of the salary of the employee. Further, a non-government employee in the new tax regime shall be allowed deduction of an amount not exceeding 14% of the employee’s salary in place of 10%.
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Explanation: Currently, section 80CCD(2) allows a deduction in the taxable income from National Pension Scheme Employer contributions – 10% from non-government subscribers and 14% from government subscribers. This deduction is allowed in both the old tax regime and the new tax regime.
Budget 2024 has allowed non-government employers to contribute up to 14% of the employee’s salary to the NPS. However, this increased deduction from 10% to 14% in the Employer contribution under section 80CCD(2) is only applicable for those file under the new tax regime!
This is a good deal for this who are already part of or can become part of corporate NPS with employer contributions. However the catch is, if you want to shift jobs in furture and the new company does not have NPS it will result in a mess. So our recommendation is, opt for this if you have a reasonably stable job (is that an oxymoron in the corporate sector?!) else stick to EPF.
3 “NPS Vatsalya a plan for contribution by parents and guardians for minors will be started. On attaining the age of majority, the plan can be converted seamlessly into a normal NPS account.”
This is eminently unnecesary. There is no need to start investments in the name of a minor. If at all you wish to do this, start investing in an index fund in their name.
Also see: Budget 2024: New Tax Regime vs Old Tax Regime Calculator: Check which is better.