Finance Minister Nirmala Sitharaman has presented the paperless Union Budget 2022 in Parliament for the second time. In this budget, the hands of the common man have been kept empty by the government, but a big relief has been given to the government employees of the states. Under this, the government employees of the states have been given the benefit of a 4 percent increase in tax deduction on the contribution of NPS (National Pension Scheme). Now the tax deduction on NPS contribution to state government employees has been increased from 10 percent to 14 percent. Let us inform you that till now the benefit of 14 percent tax deduction on NPS contribution has been given to the central employees, but now the government employees of the states will also get its benefit.
Let us inform you that from January 1, 2004, the new pension system is applicable for all the newcomers in the service of the Central Government. Under this, the central government contributes 14 percent of the basic salary to the pension of its employees. However, till the year 2019, this contribution of the government was 10 percent, which was increased to 4 percent. It was announced by the then Finance Minister Arun Jaitley at that time.
Only government employees and that too employers will get the benefit of this announcement made by Finance Minister Nirmala Sitharaman in the budget. People working in the private sector will not get the benefit. In the budget, the scope of tax exemption has been increased in the NPS scheme for government employees. Along with this, the Finance Minister announced a plan to bring a new tax reform. Employees will also get tax exemption on pension.
Employees of state governments will be able to claim a tax benefit of 14 percent on NPS contribution made by their employer i.e. state government from the financial year 2022-23. At present, only Central Government employees are eligible to claim a tax benefit of 14 percent for the employer's contribution to the employee's NPS account.