Want to save more tax under new regime? Ask your employer about this NPS benefit
The new tax regime has made income tax filing easier, but there's one complaint many salaried employees share, i.e., it offers very few deductions. If
The new tax regime has made income tax filing easier, but there's one complaint many salaried employees share, i.e., it offers very few deductions. If you've been wondering whether there's still a legal way to reduce your tax liability, the answer could lie in your salary structure rather than a new investment. A growing number of tax experts say employees should look at one benefit that often goes unnoticed: the employer's contribution to the Pension System (NPS). It is one of the few ta saving provisions that continues under the new tax regime and could help you save tax while building a retirement corpus. Read Full Story ONE OF THE FEW TAX BENEFITS STILL AVAILABLE Unlike deductions under the old tax regime, the tax benefit on an employer's contribution to NPS has been retained. CA (Dr) Suresh Surana says this makes it one of the most valuable ta saving tools for salaried individuals. "Under the new tax regime, the employer's contribution to the Pension System (NPS) continues to be one of the most significant tax benefits available to salaried individuals. It offers the dual advantage of tax optimisation and long-term retirement savings," he said. The employer's contribution is first treated as part of the employee's salary and then a deduction is allowed under the Income Tax Act, subject to the prescribed conditions.
PRIVATE SECTOR EMPLOYEES NOW HAVE MORE TO GAIN Earlier, government employees could claim a deduction on employer NPS contributions of up to 14% of salary, while private sector employees were generally limited to 10%. That gap has now narrowed under the new tax regime. "The benefit has effectively been extended to allow up to 14% of salary as a deductible employer contribution even for non-government employees, creating parity across sectors," Surana explained. This means many private sector employees can now enjoy a higher tax benefit than before if their employer offers Corporate NPS as part of the salary package. CAN YOU ASK YOUR EMPLOYER FOR A HIGHER NPS CONTRIBUTION? Yes, but it depends on your company's compensation policy. Many employers offer flexible salary structures that allow employees to choose how their cost-to-company (CTC) is divided. If your company offers Corporate NPS, you may request a higher employer contribution instead of receiving the entire amount as cash salary. "Subject to company policies, employees can request a restructuring of their salary to include a higher employer contribution to NPS, making it a viable tool for both tax planning and retirement wealth creation," Surana said. However, employees should remember that increasing the employer's NPS contribution may reduce their monthly take-home salary because more money is diverted towards retirement savings.
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