Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: form 3cd :: Central Excise rule to resale the machines to a new company :: empanelment :: ARTICLES ON INPUT TAX CREDIT IN VAT :: cpt :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARDS :: ACCOUNTING STANDARD :: due date for vat payment :: VAT Audit :: TDS :: list of goods taxed at 4% :: articles on VAT and GST in India :: VAT RATES
Indirect Tax »
 Income Tax dept to intensify anti-black money operations
 Applicability of TDS provisions of section 194-I of the Income-tax Act, 1961 on lump sum lease premium paid for acquisition of long term lease-regarding
 CBDT seeks monthly data of disposed I-T appeals
 Further indirect tax may be levied in 2017
 India has to make its own tax law
 Centre warns against criticism of GST network
 Indirect tax collection jumps 26% in April-September, direct tax 9%
 Indirect Tax collections up
 Thank you note from income tax department
 Tax dept scanning IDS disclosures filed through post
 Poor management cause of financial pressure on Centre

Employees may save additional tax of up to 3% of their basic salaries if companies roll out NPS
March, 07th 2016

HR managers and CFOs struggling to retain talent without escalating wage costs might get help from an unlikely source this year. If companies roll out the New Pension System (NPS), their employees can save additional tax of up to 1-3% of their basic salaries. If a company puts 10% of the basic salary of an employee in the NPS, that amount can be claimed as a deduction under Sec 80CCD(2). This tax deduction is over and above the Rs 1.5 lakh under Section 80C and the new deduction of Rs 50,000 introduced last year under Section 80CCD(1b).

The NPS benefit can be rolled out along with the Employees' Provident Fund. A company has to just rejig the compensation structure of its employees by including the contribution to the NPS in their total cost-to-company (CTC). The tax deduction is capped at 10% of the basic salary of an individual.

"A person with a basic salary of Rs 50,000 a month can reduce his annual tax outgo by up to Rs 12,360," says Sudhir Kaushik, co-founder of (see table).

To be sure, the benefit under Sec 80CCD(2) is not new. It was introduced four years ago but has not found many takers in the industry.

Though a few large companies, including Wipro, offer this benefit, most others have ignored the measure because it entails changing the pay roll structure. "The NPS idea has to be first sold to the company before it can be offered to the individual.

Within companies there are multiple departments to be convinced," says CR Chandrasekar, CEO of

Another reason for the lukewarm response was the poor tax efficiency of the NPS. Up to 40% of the maturity corpus is mandatorily put in an annuity and the balance 60% was taxable. This year's Budget has proposed to make 40% of the NPS maturity corpus tax free. That might nudge employers to include the NPS as part of their CTC structure. "They can reduce some taxable component of the pay package and put 10% of the basic salary into the NPS," says Manoj Nagpal, CEO of Outlook Asia Capital.

If a company decides to roll out the NPS, the process is surprisingly simple. It just needs to register as a corporate with the National Securities Depository Ltd and submit a few documents. "The whole process takes barely 3-4 days," says Sumit Shukla, CEO of HDFC Pension Fund.

But offering the benefit is one thing and convincing employees to opt for it is quite another. The NPS is a market-linked product which doesn't guarantee returns. While putting 10% of the basic pay in the NPS will certainly cut tax, it will also reduce the take-home pay of the individual. Besides, individuals who opt for the benefit will also be sacrificing liquidity. The NPS corpus can be withdrawn only at the time of retirement or for specific emergency needs.

Meanwhile, last year's budget had talked of giving employees the option to switch from the Employees'Fund to the NPS. This year's budget has even proposed a one-time tax exemption for such a switch. But observers say these measures have little meaning until the EPF Act is amended to allow such a transfer.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Multi-level Marketing MLM India Affiliate Marketing Affiliate Marketing Software MLM Software MLM Solutions Multi level marketing solutions MLM Servi

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions