An overview of the new National Pension Scheme (NPS) updates and benefits introduced in Budget 2024, including the Vatsalya scheme and changes to employer contributions.
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The NPS Vatsalya scheme is designed to help families ensure their children's financial security as they grow. Parents can contribute, and funds accumulate until the child turns 18.
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Finance Minister Nirmala Sitharaman introduced the NPS Vatsalya scheme during her Budget 2024 address, highlighting the government's commitment to long-term financial security.
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Systematic future financial planning for children, similar to existing NPS. Contributions invested in market-linked instruments for potential higher returns.
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Funds in the NPS Vatsalya scheme accumulate until the child turns 18, after which they are transferred to the standard NPS account.
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Upon reaching adulthood, the accumulated amount can be seamlessly converted into a non-NPS plan if desired, providing flexibility in financial planning.
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The Budget 2024 increases the employer NPS contribution limit from 10% to 14% of the employee's basic salary, enhancing tax benefits for employees.
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Higher contribution limits result in greater tax deductions, increasing take-home pay for employees and encouraging long-term financial planning.
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Employers benefit from tax deductions by contributing to employees' NPS accounts, with contributions considered a 'Business Expense' under the Income Tax Act.
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Employees can claim additional tax breaks under sections 80CCD(2), 80CCD(1), and 80CCD(1B) for their own NPS contributions, offering further financial incentives.
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The introduction of NPS Vatsalya and increased contribution limits under NPS in Budget 2024 aim to enhance financial security for families and employees, promoting long-term financial stability.