The present article highlights provisions of section 80CCD of the Income Tax Act, which provides a deduction of the amount paid or deposited towards the notified pension scheme.
Deduction under section 80CCD is divided into three parts which are defined as under –
1. Section 80CCD (1) – Employee’s contribution to the notified pension scheme
2. Section 80CCD (2) – Employer’s contribution to the notified pension scheme
3. Section 80CCD (3) – Relates to receipt of amount on which deduction is claimed under section 80CCD (1) or section 80CCD (1B) or section 80CCD (2) or amount accrued thereon.
Understanding section 80CCD (1) –
Section 80CCD (1) covers an ‘individual employee’ who has paid / deposited any amount towards the notified pension scheme [like National Pension Scheme (NPS)].
It is worthwhile to note here that the ‘individual employee’ mentioned above covers all the types of individual employees like private employees; government employees and also self-employed employees.
Maximum allowable deduction –
The entire amount paid / deposited by the ‘individual employee’ is allowed as a deduction under section 80CCD (1), however, the amount of deduction cannot exceed the following limit –
Additional maximum deduction condition –
Other than the above defined maximum allowable deduction condition, the individual needs to also check that as per provisions of section 80CCE, the maximum allowable deduction under section 80C, section 80CCC and section 80CCD (1) cannot exceed INR 1.50 Lakhs.
Understanding section 80CCD (2) –
When either the Central Government employer or any other employer contributes towards the notified pensions scheme (like National Pension Scheme) of an employee, such contribution made by the employer is allowed as a deduction to the employee.
Maximum allowable deduction –
The entire amount paid / deposited by the employer is allowed as a deduction under section 80 CCD (2), however, the amount of deduction cannot exceed 10% of the salary.
Understanding section 80CCD (3) –
In case the amount standing to the credit of the individual’s pension scheme account (which includes both the amount on which deduction has been allowed + amount accrued thereon) has been received by either the individual assessee or the nominee of the assessee in the following manner –
When such amount is received by the individual assessee / nominee of the assessee, the same shall be deemed to be the income of the individual assessee / nominee of the assessee and shall be chargeable to tax in the previous year in which the amount is received.
Additional deduction of INR 50,000 available as per provision of section 80CCD (1B) –
Maximum additional deduction of INR 50,000 is allowed to all the individual employee (whether private employees, government employees or self-employed employees) towards amount paid or deposited under any notified pension scheme.
Frequently Asked Question (FAQ) –
1. What is a deduction under section 80CCD?
Section 80CCD covers deduction towards the amount paid / deposited by way of employer’s contribution as well as employee’s contribution to the notified pension scheme like National Pension Scheme.
2. What is the maximum limit under section 80CCD?
3. What is section 80ccd 1b?
Section 80CCD (1B) allows additional deduction of INR 50,000 on the amount paid / deposited to the notified pension scheme.
4. How do I claim deduction under section 80ccd 1b?
Deduction under section 80CCD (1B) of the Income Tax Act can be claimed by paying / deposited an amount to the notified pension scheme. The maximum allowable deduction is limited to INR 50,000.
Other Suggested Articles on Chapter VIA Deductions
|1.||Deduction under section 80C of Income Tax Act|
|2.||Deduction under section 80CCC of Income Tax Act|
|3.||Deduction under section 80CCD of Income Tax Act|
|4.||Deduction under section 80D of Income Tax Act|
|5.||Deduction under section 80DD of Income Tax Act|
|6.||Deduction under section 80DDB of Income Tax Act|
|7.||Deduction under section 80E of Income Tax Act|
|8.||Deduction under section 80EEA of Income Tax Act|
|9.||Deduction under section 80EEB of Income Tax Act|
|10.||Deduction under section 80G of Income Tax Act|
|11.||Deduction under section 80GG of Income Tax Act|
|12.||Deduction under section 80GGA of Income Tax Act|
|13.||Deduction under section 80GGC of Income Tax Act|
|14.||Deduction under section 80QQB of Income Tax Act|
|15.||Deduction under section 80RRB of Income Tax Act|
|16.||Deduction under section 80TTA of Income Tax Act|
|17.||Deduction under section 80TTB of Income Tax Act|
|18.||Deduction under section 80U of Income Tax Act|