Under the existing provisions of the Act, the contribution by the employer to the account of an employee in a recognized provident fund is chargeable to tax if such contribution exceeds 12% of salary.
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 National Pension Scheme (NPS) for 14% of the salary contributed by the Central Government and 10% of the salary contributed by any other employer.
Presently, there is no combined upper limit for the purpose of deduction on the amount of contribution made by the employer. The Finance Bill proposes a upper limit of Rs. 7,50,000 per annum for deduction in respect of employer’s contribution to NPS, superannuation fund and recognized provident fund and any excess contribution above Rs. 7,50,000 is chargeable to tax in the hands of the employee.
Consequently, it is also proposed that any annual accretion by way of interest, dividend or any other amount of similar nature during the previous year to the balance at the credit of the fund or scheme may be treated as perquisite to the extent it relates to the employer’s contribution which is included in total income.