A Cap For Capital Savings

A major part of a salaried individual’s savings is generally parked in retirement accounts such as provident fund, superannuation fund and National Pension Scheme (NPS). These investments provide dual tax advantage — exemption/deduction in the year of contribution up to specified limits, and exemption at withdrawal, of amounts including accretions, if required conditions are met. Under current provisions of the Act, the contribution by the employer to the account of an employee in a recognised provident fund, exceeding 12 per cent of salary, is taxable. Further, the amount of any contribution to an approved superannuation fund by the employer, exceeding Rs 1,50,000, is treated as perquisite in the hands of the employee. Similarly, the assessee is allowed a deduction under NPS for 10 per cent of the salary contributed by his employer. Prior to April 1, 2020, there was no...