The government is gearing up to introduce several new measures aimed at benefiting the public. The Finance Minister is set to present the sixth budget on February 1. This budget will mark the end of the second term of the Modi government, and with general elections on the horizon, it might bring some noteworthy announcements, especially for the salaried class.
Focus on NPS in the Upcoming Budget
This time, the government is focusing on making the National Pension System (NPS) even more attractive for investors. The Finance Minister might make some significant announcements to encourage more people to invest in the NPS. Currently, subscribers to the NPS receive a deduction under Section 80CCD for contributions up to ₹50,000.
Enhanced NPS Exemption
The proposal suggests increasing the exemption under NPS in both tax regimes to ₹1 lakh. This move aims to incentivize more individuals to consider NPS as an investment option. Presently, subscribers enjoy a deduction under Section 80CCD for contributions up to ₹50,000.
Conditions of the Existing Tax Regime
It’s important to note that this facility is currently available under the old tax regime. The new tax regime does not offer this deduction. The existing tax regime, with Section 80CCE, provides a tax benefit of up to ₹1.5 lakh.
EPFO Demand for Parity with NPS
The Employees’ Provident Fund Organisation (EPFO) has been urging for changes in tax rules similar to those for NPS. Currently, there’s a disparity, with NPS subscribers getting a tax deduction on the employer’s contribution as well, while EPFO members only receive it on their contribution.
With the demand for parity between NPS and EPFO, the upcoming budget might address these concerns. The proposed increase in the exemption limit for NPS contributions up to ₹1 lakh is expected to make NPS more attractive, providing investors with greater flexibility and tax benefits. It remains to be seen how these changes will unfold and contribute to the broader goal of encouraging long-term savings and investment in the country. Stay tuned for the budget announcements on February 1, 2024, for more details on these potential developments.