Budget 2015-16 Additional deduction under Section 80CCD

Under the existing provisions contained in sub-section (1) of section 80CCD of the Income-tax Act, 1961 if an individual, employed by the Central Government on or after 1st January, 2004, or being an individual employed by any other employer, or any other assessee being an individual has paid or deposited any amount in a previous year in his account under a notified pension scheme, a deduction of such amount not exceeding ten per cent of his salary in the case of an employee and ten per cent of the gross total income in case of any other individual is allowed. Similarly, the contribution made by the Central Government or any other employer to the said account of the individual under the pension scheme is also allowed as deduction under sub-section (2) of section 80CCD, to the extent it does not exceed ten per cent of the salary of the individual in the previous year. Sub-section (1A) of section 80CCD provides that the amount of deduction under sub-section (1) shall not exceed one hundred thousand rupees. Till date, under section 80CCD, only the National Pension System (NPS) has been notified by the Ministry of Finance.

With a view to encourage people to contribute towards NPS, it is proposed to omit sub-section (1A). In addition to the enhancement of the limit under section 80CCD(1), it is further proposed to insert a new sub-section (1B) so as to provide for an additional deduction in respect of any amount paid, of upto fifty thousand rupees for contributions made by any individual assessees under the NPS.

Consequential amendments are also proposed in sub-section (3) and sub-section (4) of section 80CCD.

These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

NOTE ON RELEVANT CLAUSES  OF FINANCE BILL 2015

Clause 17 of the Bill seeks to amend section 80CCD of the Income-tax Act relating to deduction in respect of contribution to pension scheme of Central Government.

The existing provisions contained in sub-section (1) of section 80CCD, inter alia, provides that in the case of an individual, employed by the Central Government on or after 1st January, 2004, or being an individual employed by any other employer or any other assessee being an individual who has in the previous year paid or deposited any amount in his account under a pension scheme notified or as may be notified by the Central Government, a deduction of such amount not exceeding ten per cent. of his salary is allowed.

It is proposed to omit sub-section (1A) and insert a new sub-section (1B) so as to provide that an assessee referred to in sub¬section (1), shall, be allowed an additional deduction in computation of his total income, of the whole of the amount paid or deposited in the previous year in his account under a pension scheme notified or as may be notified by the Central Government, which shall not exceed fifty thousand rupees. It is also propose to provide that no deduction under this sub-section shall be allowed in respect of the amount on whcih deduction has been claimed and allowed under sub-section (1).

Consequential amendments have been proposed in sub-section (3) and sub-section (4) of section 80CCD.

These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

EXTRACT OF RELEVANT CLAUSES FROM FINANCE BILL 2015

17. Amendment of section 80CCD.

In section 80CCD of the Income-tax Act, with effect from the 1st day of April, 2016,-—

(a)      sub-section (1A) shall be omitted;

(b)      after sub-section (1A), as so omitted the following sub-section shall be inserted, namely:—

“(1B) An assesse referred to in sub-section (1), shall be allowed a deduction in computation of his total income, [in addition to the deduction allowed under sub-section (1)], of the whole of the amount paid or deposited in the previous year in his account under a pension scheme notified or as may be notified by the Central Government, which shall not exceed fifty thousand rupees:

Provided that no deduction under this sub-section shall be allowed in respect of the amount on which a deduction has been claimed and allowed under sub-section (1);

(c) in sub-section (3),—

(I)       for the words, brackets and figure, “sub-section (1)”, wherever they occur, the words, brackets, figures and letter “sub-section (1) or sub-section (1B)” shall be substituted;

(II)      for the words “under that sub-section”, the words “under those sub-sections” shall be substituted;

(d) in sub-section (4), for the words, brackets and figure, “sub-section (1)”, the words, brackets, figures and letter “sub-section (1) or sub-section (1B)” shall be substituted.

( Compiled by Taxguru Team)

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83 responses to “Sec. 80CCD- Additional deduction for National Pension System contribution”

  1. Ashok Kumar says:

    I am working as a Assistant, My Gross Salary is 800000. my CPS deduction is 65000. I have invested Rs.100000 in Life Insurance Premium, and I have to pay Rupees 60000 as House Loan Principal and Rs 30000 as tuition fees to daughter. May I avail Rs 50000 dedction as NPS under Sec 80CCD(1b).

  2. b c sekar says:

    Dear Sir,
    I am a Central Govt. employee, joined before 01.01.2004. Kindly inform me whether the deduction under section 80CCD(1B) is allowed only for TIER-1 contribution (or) Tier-2 contribution (or) for both. Thanks–SEKAR, CHENNAI-
    E-MAIL: bcskal@rediffmail.com

  3. Preet Agrawal says:

    Deduction from employer happened on 30th March but the units got credited on 3rd April.

    Which financial year my contribution will be counted. Any Income Tax section which justifies that.

  4. Garg Sunil Kumar says:

    Case 1. A employee has gross salary Rs. 12,00,000 and he invested LIC Rs 120,000 PPF 40,000 his contribution to NPS 10% is 1,00,000 . Can he claim a deduction u/s 80 ccd(1b) of Rs. 50,000. Total deduction Rs. 2,00,000

  5. S R Yadav says:

    I am a Central Govt.employee having Old Pension Scheme under which I am getting tax benefit up Rs.150000 after deducting the sufficient amount in GPF.

    Can I get extra tax benefit for an amount of Rs.50000 if I am opening a account in New Pension Scheme.

    If so, what is the procedure for opening an account and where i.e. SBI etc. I can open the same.

    Please reply, so i can get tax benefit before February 2017 salary.

  6. c k murthy says:

    in NPS can we clime Govt contribution for tax exemption

  7. NISHA SAJWAN says:

    sir, i invested Rs 1,80,000 in LIC & HBA principle. my contribution in NPS Rs 50000

    so, can i claim deduction of Rs 50,000 from this amount of Rs 50000 under section 80ccd(1b)? plz reply … Thank you

  8. Siva says:

    sir, i invested Rs 1,80,000 in LIC & HBA principle. my contribution in NPS Rs 84000

    so, can i claim deduction of Rs 50,000 from this amount of Rs 84000 under section 80ccd(1b)? plz reply … Thank you

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