Finance Minister Nirmala Sitharaman on Tuesday announced several people-friendly measures in the Union Budget 2024-25, targeting the salaried class and pensioners. In her budget speech in parliament, Sitharaman announced raising the deduction limit for employers’ contribution in the National Pension System (NPS) from 10 per cent to 14 per cent, while withdrawing the 2 per cent equalisation levy. She also raised the standard deduction for salaried employees to Rs 75,000 from Rs 50,000 under new income tax regime.

Also, deduction for family pension for pensioners has been enhanced from Rs 15,000 to Rs 25,000, which she said will provide relief to some 4 crore salaried individuals and pensioners.

Acknowledging certain flaws in the system, the finance minister stressed that a solution will be developed to address the relevant issues with NPS while ensuring fiscal prudence. “A solution will be evolved which addresses the relevant issues while maintaining fiscal prudence to protect the common citizens,” she said.

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NPS Review

Last year, the finance ministry had set up a committee under Finance Secretary T.V. Somanathan to review the NPS scheme for government employees and suggest changes, if any. This came as several non-BJP-ruled states went back to the DA-linked old pension scheme (OPS) amid similar demands from the employees’ organisations in other states.

During her Budget speech in the Lok Sabha on Tuesday, Sitharaman said, “The Committee has made considerable progress in its work. I am happy that the staff side of the National Council of the Joint Consultative Machinery for Central Government Employees have taken a constructive approach. A solution will be evolved which addresses the relevant issues while maintaining fiscal prudence to protect the common citizens.”

In the old pension scheme, retired government employees get 50 per cent of their last drawn salary as monthly pensions, which keep increasing with the increase in the DA rates.

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Other Benefits

The finance minister also announced measures to improve social security benefits. She said deduction of expenditure by employers towards NPS will be increased from 10 to 14 per cent of the employee’s salary, which will apply to both public and private sector employees.

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Besides these sops, the finance minister also proposed to start NPS Vatsalya to allow parents to open account as well as contribute on behalf of their minor children. On reaching 18, she said, the plan can be converted into a normal NPS account.