Budget 2022: State government employees to get NPS tax benefits at par with their central peers

Finance Minister Nirmala Sitharaman

Now, state government employees can claim tax break on their employers’ contribution to their National Pension System (NPS) of up to 14 percent of their basic salary and dearness allowance.

Until now, this was capped at 10 percent for state government and private sector employees. Finance Minister Nirmala Sitharaman on Tuesday raised this tax exemption limit, available under section 80 CCD (2), for this segment of employees. This benefit is offered under both the tax regimes.

So far, only central government employees enjoyed this additional benefit. Now, there is parity between state and central government employees. For private sector employees, however, the ceiling continues to be 10 percent.