Union Budget 2022-23: Tax Deduction limit hiked to 14% from 10% on NPS accounts

Several tax-related announcements were made by Finance Minister Nirmala Sitharaman as she presented the Union Budget 2022 on Tuesday. While the government has not made any changes in the slabs of income tax, it proposed to increase the tax deduction limit on NPS. FM in her budget speech announced that both state and central government employees' limit of tax deduction will be increased from 10% to 14% on NPS (National Pension System) accounts.

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This decision is made to support the social security benefits of state government to offer equal treatment at parity with the central government employees. The tax benefit is limited to 10% for private-sector employees. Announcing tax-related modifications, Sitharaman added, “to give an opportunity to correct an error, now taxpayers can file an updated return within two years from the relevant taxation year”.

The highlights of the Union budget 2022 are:

Tax deduction increased from 10% to 14% on NPS accounts
Presently, only the central govt. employees are entitled to claim a tax-saving benefit of 14 percent to the NPS account of an employee for the employer’s contribution
The corporate surcharge will be decreased from 12% to 7%

Union Budget 2022 has proposed to bring uniformity in the tax deduction limit on contribution to NPS, between central and state government employees.