11/21/2016

Section80CCD:DeductionforNPSContribution:Budget2016

Section80CCD:DeductionforNPSContribution:Budget
2016

IncomeTaxActprovidesforvariousdeductionsunderChapterVIAforContributiontoPension
Plans.TheseDeductionsareavailableunderSection80C,Section80CCC&Section80CCDand
can be claimed at the time of filing of the income tax return. This article mainly focuses on
DeductionsallowedunderSection80CCD.FordeductionsunderSection80C&Section80CCC,
referthefollowinglinks:
Section80CCC:DeductionforContributionforPensionPlanofInsuranceCompany
Section80C:DeductionforContributionPensionPlanofUTI/MutualFund

DeductionunderSection80CCD
Section 80CCD provides for Income Tax deductions for contributions made to the notified

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PensionSchemeoftheCentralGovti.e.forcontributiontotheNationalPensionScheme(NPS).
Deduction under this Section is only available to Individuals and not to HUFs. The Individual
claimingdeductionunderthisSectionmaybeResidentorNonResident.
Section80CCD(1):DeductiontoNPSSchemeforContributionbytheIndividual

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Section80CCD:DeductionforNPSContribution:Budget2016

Deduction under Section 80CCD(1) is not only available to Salaried Individuals but nonsalaried
individualscanalsocontributetotheNPSSchemeandavaildeductionforthesame.
ThemaximumamountallowedasadeductionunderSection80CCD(1)is:
In case of an employees: 10% of his salary for the financial year (Salary includes Dearness
AllowancebutexcludesallotherAllowancesandPerquisites)
Incaseofnonemployees:10%oftheGrossTotalIncomeintheFinancialYear

AMENDMENTVIDEBUDGET2015INSECTION80CCD
EarlierthedeductionallowedforcontributiontoNPSwaslimitedtoRs.1Lakh[SubSection1Aof
Section 80CCD]. However, with a view to encourage people to contribute towards NPS, the
maximum amount allowed to be invested in National Pension Scheme has been increased from
Rs.1LakhstoRs.1.5Lakhs.
Moreover,intheBudget2015announcedbyArunJaitleyanewsubsection1Bhasalsobeen
introduced so as to provide for additional deduction in respect of any amount paid, of upto
Rs.50,000forcontributionsmadebyanyIndividualassesseesunderNPS.

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ThisadditionalbenefitofRs.50,000isoverandabovethebenefitofRs.1.5Lakhsallowedtobe
claimedasadeductionunderSection80C.Therefore,nowthetotaldeductionthatcanbeclaimed
underSection80C+Section80CCD=Rs.2Lakhs.

SECTION 80CCD(2): DEDUCTION TO NPS SCHEME FOR

CONTRIBUTIONBYTHEEMPLOYER
IncaseanyemployercontributestotheNPSSchemeonbehalfoftheemployeeandthebenefitof
the same would be availed by the employee, the employee would also be allowed a deduction
underSection80CCD(2)fortheamountofcontributionmadebytheemployer.
The contribution made by the employee himself to the NPS Scheme would be allowed as a
deduction under section 80CCD(1) and the contribution made by the employer to the NPS
SchemewouldbeallowedasadeductionunderSection80CCD(2).
TheDeductionallowedunderSection80CCD(2)wouldbeallowedforEmployersContributionup
to10%oftheSalaryoftheIndividual.
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11/21/2016

Section80CCD:DeductionforNPSContribution:Budget2016

TAX ON AMOUNT RECEIVED BACK FROM THE NATIONAL

PENSIONSCHEME
ThecontributionmadetotheNPSSchemewouldbereceivedbackbytheemployeeasPension
afterretirementoronsurrenderofthepolicy(asthecasemaybe).
Budget2016Update:OnwithdrawlfromtheNPSAccount,40%oftheaccumulatedbalanceshall
beexemptfromTaxandtheremainingwouldbetaxedaspertheIncomeTaxSlabsintheyearof
receipt.

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RecommendedRead:ComputationofTaxonPensionIncome

Iftheamountreceivedbyataxpayerhasbeenusedforpurchasinganannuityplaninthesame
yearintheyearofreceipt,thetaxpayerwouldbedeemedtohavenotreceivedanyamountfrom
theNPSSchemeandthereforenotaxwouldbeleviedonthesame.

ABOUT THE AUTHOR

KaranBatra
APersonalFinanceenthusiast,Karanisthefounderofcharteredclub.comand
lovestodiscussaboutMoneyrelatedmatters.

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11/21/2016

Section80CCD:DeductionforNPSContribution:Budget2016

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