According to CBDT (Central Board of Direct Taxes) there are 770 lakhs registered individual tax payers. Individual Tax payers always worries about the burden of Direct taxes. There are numerous of provisions under the income tax act 1961 which provide the Tax relief to different type of assessee whether by way of Exemptions or deductions from total income. Very well-known section for deduction is sec 80C of income tax, it provides the deduction of Rs.1, 50,000 to Individual or HUF. There are some other sections which provide the deduction to individual or HUF Assessee but here in this Article I would like to Discuss on section 80CCD.

Sec 80CCD of income tax act 1961 provide deduction on contribution to Pension Fund setup by Central Government. An individual person can get deduction up to 2, 00,000 under this particular section. The provisions of this particular section is as follows:-

There are two type of Individual tax payers covered under this section

  • Employees – Persons employed in any organisation
  • Self Employed – Engaged in Business and profession

Extent of deductions Allowed to above category of tax payers:-

1) Deductions under Section 80CCD allowed to employees

Amount under the pension fund scheme can be contributed by both employers and employee himself. If Employer contributes any amount in pension scheme on behalf of such employee then such amount shall form part of salary and then allowed to be deducted.

For the amount contributed by employer respective employee can get the deduction under section 80CCD (2) and for the amount deposited by the employees himself deduction could be availed under section 80CCD (1)

However deduction under section 80CCD cannot exceed 10% of salary and salary for the purpose of sec 80CCD includes Basic salary + Dearness allowance (If terms of employment provides for inclusion in benefits)

Note: – As per section 80CCE aggregate deduction under section 80C+80CCC+80CCD (1) cannot exceed Rs.1, 50,000

But amount of deduction under section 80CCD (2) do not fall in the ceiling of section 80CCE 

2) Deductions under Section 80CCD allowed to Self Employed individuals

If self-Individual contributes any amount towards the pension scheme of central government (National pension scheme) then such individual could avail the deduction up to 20% of gross total income.

This is subject to overall ceiling of Rs.1, 50,000 under section 80CCE

Note: – As per finance act 2015 assessee can avail and additional deduction of Rs.50,000 on amount contributed by it. It means in both the cases an assessee can avail the total deduction of Rs.2, 00,000 under section 80 CCCD.

 Conditions attached to deductions under section 80CCD:-

  • Deduction shall be allowed on actual payment basis
  • No deduction under section 80C if allowed under this section
  • Any amount withdrawn or pension received is taxable in hands of assessee, However as per sec 10(12A) any amount received on account of closure of pension Account or Opting  out of Pension scheme is not taxable if amount doesn’t exceed 40% of amount entitled
  • If any partial Withdrawal from NPS to the extent of 25% of amount contributed is not taxable as per section 10(12B)
  • Assessee shall be deemed to not received any amount in previous year if such amount used to purchase annuity plan in same previous year
  • Any amount received by the nominee on death of employee not taxable

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Qualification: Student - CA/CS/CMA
Company: SUD Gupta & Associates
Location: Amritsar, Punjab, IN
Member Since: 09 Aug 2017 | Total Posts: 3

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