The full budget of 2024 which was presented today in parliment brought exciting news for salaried employees looking to secure their retirement with the National Pension System (NPS). Two significant changes have been introduced that can potentially lower your taxable income and accelerate your retirement savings.
1. Increased Employer Contribution and Tax Deduction
The government has raised the limit on employer contributions to your NPS account from 10% to 14% of your salary. This means your employer can contribute more towards your retirement savings, effectively reducing your taxable income.
Moreover, if you’ve opted for the new tax regime, you can now claim a deduction of up to 14% of your salary on your own contributions towards NPS. This enhanced deduction, coupled with the increased employer contribution, can significantly lower your tax burden, leaving you with more disposable income.
Example
Let’s say your annual basic salary is ₹10 lakhs. With the new rules, your employer can contribute up to ₹1.4 lakhs to your NPS account, which will be exempt from tax. Additionally, you can contribute up to ₹1.4 lakhs yourself and claim a tax deduction on this amount. This could potentially save you a substantial amount in taxes, depending on your tax bracket.
2. NPS-Vatsalya for Minors
The government has also introduced a new scheme called NPS-Vatsalya, allowing parents and guardians to start investing in NPS for their minor children. This scheme can help you build a corpus for your child’s future education, marriage, or other financial goals. When the child reaches adulthood, the account can be seamlessly converted into a regular NPS account, ensuring a smooth transition into their own retirement planning.
Overall Impact
These changes make NPS an even more attractive option for retirement planning. The increased tax deductions and employer contributions can help you save more, while the NPS-Vatsalya scheme allows you to start investing early for your child’s future. If you’re a salaried employee, now is a great time to reassess your retirement strategy and consider how these new NPS benefits can help you achieve your financial goals.
