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

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.

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.

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.