Incentives to National Pension System (NPS) subscribers for state government employees
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
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 per cent to fourteen per cent 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.
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Note on Clause 20 of Finance Bill 2022
Clause 20 seeks to amend section 80 CCD of the Income-tax Act relating to deduction in respect of contribution to pension scheme of the Central Government.
Sub-section (2) of the said section, inter alia, provides that in respect of any contribution made by the Central Government or any other employer to the account of the employee under a notified pension scheme, the assessee shall be allowed a deduction in the computation of his total income, of the whole of the amount contributed by the Central Government as it does not exceed fourteen per cent. or any other employer as it does not exceed ten per cent. of his salary in the previous year.
It is proposed to amend the said sub-section so as to provide that the deduction under the said section shall be allowed to the assessee, in respect of any contribution made by the State Government also to the account of the employee under a notified pension scheme, of the whole of the amount contributed by the State Government as it does not exceed fourteen per cent. of his salary in the previous year.
This amendment will take effect retrospectively from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.
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Extract of Clause 20 of Finance Bill 2022
20. Amendment of section 80CCD.
In section 80CCD of the Income-tax Act, in sub-section (2), for the words “Central Government” wherever they occur, the words “Central Government or the State Government” shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 2020.
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RECOMMENDED BUDGET 2022 POSTS
please send notification
Kindly guide me on the following points:
1) whether an employee of a body corporate wholly owned by Central Government will be treated as
Central Government Employee or Not.?
2) In light of the amendment by Finance Act 2022 in Sec 80CCD to allow 14% deduction to State Government Employee (which was 10% earlier), can state government employee claim 14% employer contribution to NPS as deduction u/s 80CCD(2) in ITR for AY 2022-23?
3) The said amendment is with retrospective effect from 1st april 2020 i.e, FY 2019-20.
Thus whether the balance of unclaimed deduction of 4% of employer contribution to NPS during FY 2019-20 and FY 2020-21 be claimed by State Government Employee in ITR for AY 2022-23?
If not then in ITR how should the unclaimed 4% of last 2 FY be claimed.