Section 80CCD of the Income-tax Act provides, inter al/a, a deduction in respect of contributions made by an employee as well as an employer to the New Pension System (NPS) account on behalf of the employee. In view of the provisions of section BOCCE, the aggregate deduction under sections 80C, 80CCC and 80CCD cannot exceed one lakh rupees. The allowable deduction under section 80CCD includes both the employee’s as well the employer’s contribution to the NPS.
It is proposed to amend section BOCCE so as to provide that the contribution made by the Central Government or any other employer to a pension scheme under section 80CCD(2) shall be excluded from the limit of one lakh rupees provided under section BOCCE.
Currently, the contribution made by an employer towards a recognised provident fund, an approved superannuation fund or an approved gratuity fund is allowable as a deduction from business income under section 36, subject to certain limits. However, the contribution made by an employer to the NPS is not allowed as a deduction.
It is, therefore, proposed to amend section 36 so as to provide that any sum paid by the assessee as an employer by way of contribution towards a pension scheme, as referred to in section 80CCD(2) on account of an employee to the extent it does not exceed ten per cent. of the salary of the employee in the previous year, shall be allowed as deduction in computing the income under the head “Profits and gains of business or profession”.
These amendments are proposed to take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-13 and subsequent years.