State government employees will be able to claim a tax benefit of 14 per cent on NPS (National Pension Scheme) contribution made by their employer, beginning FY2022-23, bringing it on a par with central government employees, the Union Budget 2022 has proposed. For private-sector employees, this remains capped at 10 per cent.

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This amendment will be effective 1 April 2020. Accordingly, it will apply to the assessment year 2020-21 and subsequent assessment years to ensure no additional tax liability arises on any contribution made more than 10% during such time.

In her budget speech on Tuesday, finance minister, Nirmala Sitharaman, said, “To provide equal treatment to both central and state government employees, I propose to increase the tax deduction limit from 10% to 14% on employer’s contribution to the NPS account of state government employees as well. This process would help enhance the social security benefits of the state government employees and bring them at par with central government employees.”