I am a central government employee under new pension scheme. Presently I am working in deputation on same ministry in a PSU. My question is that as per central government employee in NPS government contribution is 14% and it is tax free contribution made by government. However, the PSU which is governed by same ministry is contributing 14% but the only 10% amount is tax free and 4% they added in my income and increased my tax liability.
What is the rule in this regard and also where I will know you replied my answer
Ans: For NPS contribution by employer, employee is eligible for tax deduction up to 10% of salary (Basic + DA) (14% if such contribution is made by Central Government) contributed by employer under Section 80 CCD (2) over the limit of Rs 1.5 lakh provided under section 80 CCE.
In your case contribution is not made by central government, contribution, contribution above 10% of salary is not eligible for deduction and correctly added to Income.