NPS- employer Contributions

The Rs. 7.5 lakh threshold for employer contributions became active in 2020. Retrospective contributions should not be taxed under these rules for years prior to that. If this lump sum is treated as "salary arrears," you should utilize Form 10E to claim tax relief under Section 89(1). You must get a clear, written clarification from your employer regarding the nature of this deposit and whether they have categorized it as taxable salary/perquisite before you file your income tax return.

Yes, Contributions made by the employers to NPS can be deducted under Section 80CCD(2) within stipulated limits. This deduction is in addition to Section 80C and Section 80CCD(1B) deductions, and is for salaried employees only.

Key points:

  - The contribution has to be done by the employer to the Tier-I NPS account of the employee.
   - Under the new tax regime, deduction for employer NPS contribution continues to be available even though most other deductions are not.
   - The deduction applies in general to the percentage which is specified attached to the Basic Salary + DA (where applicable) as per the overall tax provisions.
   - Don't forget also the aggregate limit of PF contributions by the employer (₹7.5 lakh per year). If there is any surplus, it could be considered a perquisite and taxed.

If the NPS contribution by the employer is reflected in Form 16, then check if it is correctly reported as income under Section 80CCD(2) in the ITR. If not pre-filled, it is possible that they will need to be claimed manually after eligibility and keeping of supporting documents.