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Tax-exempt employer contribution to PF, NPS capped: Why high earners should opt for VPF, NPS

Till now, individuals with high basic salary could have the employer contribute up to 22% of the basic towards PF and NPS (12% and 10% ) and up to Rs 1.5 lakh to a superannuation fund and avail tax exemption on the entire amount.

By Sanket Dhanorkar, ET Bureau |Updated: February 10, 2020, 06.02AM IST
The Budget has been a shock for high salary earners. On the chopping board is a critical tax benefit. If the employer’s combined contribution to the Provident Fund, National Pension System and superannuation fund exceeds Rs 7.5 lakh a year, the excess contribution would be taxed from 1 April 2021. Earlier, there was no such ceiling. Till now, individuals
limit to contribution in NPS if its your own money. “It would be good to self-contribute in NPS even though maximum deduction is only to the extent of Rs 2 lakh through 80C and 80CCD (1b),” suggests Gupta. Under the ‘active choice’ mode of NPS, subscribers can maintain higher equity exposure (maximum 75%) until age 50 which moderates gradually thereafter.

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