prpri Section 80CCD limit for self-employed individual increased to 20% Budget 2017: Section 80CCD limit for self-employed individual increased to 20%

Budget 2017: Rationalisation of deduction under section 80CCD for self-employed individual

The existing provisions of section 80CCD provides that employee or other individuals shall be allowed a deduction for amount deposited in National Pension System trusts (NPS). The deduction under section 80CCD (1) cannot exceed 10% of salary in case of an employee or 10% of gross total income in case of other individuals. However, under the provisions of section 80CCD (2) of the Act, further deduction to an employee in respect of contribution made by his employer is allowed up to 10% of salary of the employee. Thus, in case of an employee, the deduction allowed under section 80CCD adds up to 20% of salary whereas in case of other individuals, the total deduction under section 80CCD is limited to 10% of gross total income.

In order to provide parity between an individual who is an employee and an individual who is self-employed, it is proposed to amend section 80CCD so as to increase the upper limit of ten per cent of gross total income to twenty per cent in case of individual other than employee.

This amendment will take effect from 1st April, 2018 and, will accordingly, apply in relation to assessment year 2018-19 and subsequent years.

[Clause 33]

Extract of relevant clause from Finance Bill, 2017

Amendment of section 80CCD.

33. In section 80CCD of the Income-tax Act, in sub-section (1), in clause (b), for the words “ten per cent.”, the words  “twenty per cent.” shall be substituted with effect from the 1st day of April, 2018.

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July 2021