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EMPOLYER CONTRIBUITION IN NPS 80CCD2 IS TAXABLE OR NOT

srinivasa rao bs (chartered accountant) (74 Points)

09 February 2023

HOW WE HAVE TO CALCULATE NPS IN INCOME TAX CALCULATION

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (193888 Points)
Replied 09 February 2023

In respect of employer’s contribution toward NPS account of an employee, deduction under Section 80CCD (2) is available to an employee. The deduction under Section 80CCD (2) is available upto 10% of the basic salary and dearness allowance of the employee. For the Central and State government employee a higher deduction of 14% of contribution as percentage of basic salary is available.

Though there is no overall limit for deduction in respect of employer’s contribution towards NPS account of an employee under Section 80CCD (2) but Section 17(2) of the Income Tax Act provides that in case aggregate of employer’s contribution towards employee’s employee provident fund, National Pension System and Superannuation exceeds seven lakhs fifty thousand in a year, the excess shall be taxed as perquisite in the hands of the employee.

So effectively an employee can claim deduction upto Rs. 7.50 lakhs for employer’s contribution to his NPS account in a year.

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