The deduction under Section 80CCD(2) is set to be raised from 10% to 14% of the basic salary for all NPS subscribers. Previously, only government employees were eligible for the 14% deduction, but now this benefit has been extended to all other NPS subscribers including the private sector as well.

In accordance with the budget 2024, a non-government employee in the new tax regime shall also be allowed deduction of an amount not exceeding 14% of the employee’s salary in place of existing limit of 10%, starting from 01 April, 2025.

While the new tax regime offers the NPS benefit only under Section 80CCD (2), the old tax regime allows three deductions under Sections 80CCD (1) (Rs 1.5 lakh), 80CCD (1B) (Rs 50,000) and 80CCD (2). However, the higher limit of 14% under Section 80CCD (2) is available for all those who opt for the new tax regime, while this benefit is 14% only for the government employees under the old tax regime and remains uncahnged at 10% for non government NPS subscribers.

The budget has also introduced a new scheme called NPS Vatsalya, which encourages long-term savings for children by their NPS subscribing parents. Under this scheme, parents and guardians can contribute to the NPS account of minor children below the age of 18. Once the child turns 18, the plan can be seamlessly be converted into a regular NPS account.