The Interim Budget 2024 which was presented by FM Nirmala Sitharaman, was expected to make certain changes to the National Pension System (NPS). Experts suggest increasing the additional deduction for the NPS.
The introduction of a Rs 50,000 deduction under Section 80CCD(1b) resulted in a significant increase in voluntary subscribers. An annual investment of Rs 50,000 in the NPS may not lead to a substantial pension. With a compounded 9% return, this investment would accumulate approximately Rs 47 lakh in 25 years, providing a monthly pension adjusted for a 6% inflation rate, this pension would effectively be worth only Rs 5,300.
While raising the deduction limit to Rs 1 lakh from the present Rs 50,000. This adjustment would incentivise subscribers to save more for their retirement, ultimately contributing to India’s transformation into a pension society. As we know tax benefits wield a substantial influence on individuals’ investment decisions.
Although a raised limit is expected to stimulate more substantial investments for retirement, it is important to acknowledge that the NPS already benefits from multiple tax advantages compared to other retirement savings options. Augmentation to the deduction should be implemented after thoughtful examination.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
