Section 80CCD of Income Tax - Deduction under National Pension Scheme [NPS]

SECTION 80CCD - DEDUCTION FOR INVESTMENT IN NATIONAL PENSION SCHEME

The Income Tax Act provides a deduction u/s 80CCD to promote the contribution made by any individual/employer/employee National Pension Fund Scheme.

The Scheme is popular because an extra deduction of Rs.50000 is allowed through this section which is over and above Rs.150000 provided u/s 80C.

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Here we look at various provisions of Section 80CCD of the Income Tax Act.

This Section has three parts :

1.Section 80CCD(1)

2.Section 80CCD(1B)

3.Section 80CCD(2)

Section 80CCD(1)

As per this Section, any person i.e. either employed with the Central Government or any other employer or any other Individual (whether employed or not) who makes any contribution to the National Pension Scheme will be eligible for deduction subject to the following limits :

(a) In case of Employee - 10% of his salary

(b) In any other case - 20% of his gross total income for the previous year

For this purpose, Salary will include dearness allowance but will exclude all other perquisites or allowances;

Section 80CCD(1B) - Additional Deduction

As per this sub-section, all the person who contributes an additional amount will get a deduction of Rs.50000/- extra which is over and above the deductions allowable u/s 80C, 80CCC & 80CCD(1) which is Rs.150000/-

Section 80CCD(2) -

For contributions made by Employer i.e. Central Govt. or others

Thus when the employer makes contributions to this scheme, the deduction is available to the individual as under:

(a) 14% of the Salary when the employer is Central Govt.

(b) 10% of the Salary when the employer is any other than Central Govt.

However, the Contribution will have to be added to the Salary Income and then the deduction can be claimed as above.

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