The employer’s contribution to the income tax National Pension System (NPS) is eligible for a deduction under Section 36(1)(v) of the Income Tax Act, 1961. The deduction is available up to 10% of the salary (basic salary plus dearness allowance) of the employee. This deduction is applicable from the assessment year 2012-13 onwards.

For central government employees, the employer’s contribution under income tax rate has been enhanced to 14% w.e.f. 01.04.2019.

The deduction under Section income tax 36(1)(v) is over and above the deduction available under income tax Section 80C of the Income Tax Act. Section 80C allows a deduction of up to Rs.1.5 lakh on investments made in various saving schemes, including the NPS.

To claim the deduction under Section incometax36(1)(v), the employer must submit a certificate from the pension fund manager to the employee’s income tax return. The certificate must contain the following information:

• The name of the employee
• The PAN of the employee
• The amount of contribution made by the employer
• The date of contribution
• The NPS scheme in which the contribution was made

The employer’s contribution to the income tax NPS is a valuable tax saving option for both employers and employees. It can help to reduce the overall tax liability and provide a secure retirement income tax for the employee.

EXAMPLES

• Maharashtra: 12% of the employee’s basic salary and dearness allowance.
• Tamil Nadu: 10% of the employee’s basic salary and dearness allowance.
• Karnataka: 8% of the employee’s basic salary and dearness allowance.
• Gujarat: 10% of the employee’s basic salary and dearness allowance.
• Delhi: 12% of the employee’s basic salary and dearness allowance.

FAQ QUESTIONS

• What is the maximum amount of employer’s contribution income tax that is eligible for tax deduction under Section 36(1)(v)?

The maximum amount of employer’s contribution under income tax that is eligible for tax deduction under Section 36(1)(v) is 10% of the employee’s salary (basic salary + dearness allowance).

• Can the employer contribute more than 10% of the employee’s salary?

Yes, the employer can contribute income tax more than 10% of the employee’s salary, but the excess amount will not be eligible for tax deduction.

• What are the documents required to claim income tax deduction for employer’s contribution to NPS?

The following documents are required to claim tax deduction for employer’s contribution to NPS:

* NPS contribution statement from the NPS administrator

* Salary slips of the employee

* Income tax return form

• When can the employer claim tax deduction for its contribution to NPS?

The employer can claim tax deduction income tax for its contribution to NPS in the same assessment year in which the contribution is made.

• What are the benefits of the tax deduction income tax for employer’s contribution to NPS?

The tax deduction for income tax employer’s contribution to NPS can help the employer to save a significant amount of tax.