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The National Pension System (NPS) is an excellent tool for retirement planning. However, while most employees are familiar with what is NPS and even contribute towards it, many overlook a powerful advantage – employer contribution to NPS. They can help you enhance your retirement savings without any additional investments and even claim tax benefits. <\/p>\n\n\n\n
In this article, we\u2019ll break down everything you need to know about NPS employer contributions.<\/p>\n\n\n\n
The employer\u2019s contribution is the amount deposited by the employer into your NPS account. While it isn\u2019t mandatory for private sector employers, many companies offer this perk as part of employee benefits. It is a voluntary contribution that often matches your own NPS contribution up to a certain limit.<\/p>\n\n\n\n
However, in the public sector, employer contributions to NPS are mandatory and follow a fixed contribution structure. They enhance retirement savings and provide tax benefits to both the employer and the employee. <\/p>\n\n\n\n
In the private sector, employers can contribute up to 10% of employees\u2019 basic salary plus dearness allowance (DA) to their NPS account every month. However, this limit is higher at 14% for Central Government employees or bank staff.<\/p>\n\n\n\n
Thanks to long-term compounding, the employer’s contribution helps grow your retirement savings faster. Say your employer contributes Rs. 5,000 every month to your NPS account. The annual contribution will come to Rs. 60,000. If your employer contributes regularly for 25 years at an average annual return of 10%, the maturity amount will be more than Rs. 65 lakh. This is an addition to your retirement savings without investing a single rupee from your own pocket.<\/p>\n\n\n\n
You can also enjoy tax benefits under various sections of the Income Tax Act.<\/p>\n\n\n\n
You can claim the following tax deductions on NPS contributions made by both you and your employer:<\/p>\n\n\n\n
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