Section 80CCD of the Income Tax Act, 1961- (Deduction based on Investment)
The following conditions need to be satisfied for the applicability of Section 80CCD:-
1 It is applicable to only Individual assessee.
2 It is applicable to Individual assessee employed with Central Government or employed by any other person other than Central Government. It is applicable to the self-employed individual assessee as well.
3 The deposit has to be made in the account maintained under the New Pension Scheme or Atal Pension Scheme.
If all the above conditions are satisfied then the individual assessee is entitled to deduction subject to limits as specified below:
|In the case of Self-employed individual||In the case of employed individual (Govt. or other than Govt.)|
|Employee’s contribution||Employer’s contribution|
|20% of Gross Total Income(GTI)||10% of salary*||10% of salary*|
|Section 80CCD(1)||Section 80CCD(1)||Section 80CCD(2)|
Salary includes basic salary and dearness allowance (if terms of employment so provide) and commission (as per the terms of employment) but excludes all other allowances and perquisites.
Section 80CCD(1B):- An additional deduction of up to Rs. 50,000/- for the contribution made by the individual assessee is also available under the New Pension Scheme. This deduction is in addition to deduction available to the individual assessee under section 80CCD(1) and 80CCD(2).
Section 80CCE:- This section provides for the overall ceiling limit of Rs. 1,50,000/- in respect of deductions available under sections 80C, 80CCC and 80CCD(1).
Example: Mr M is employed with his basic income being Rs. 15,50,000/- per annum and dearness allowances of Rs. 50,000/– per annum.
His company contributes 10% of his salary in NPS. He contributes Rs. 1,05,000 towards his NPS. Apart from contribution in NPS he deposits Rs. 1,00,000/- in PPF and Rs. 5,000/- towards LIC premium.
|Description||Amount (in Rs.)||Amount (in Rs.)|
|Gross Total Income (A)||16,00,000|
|Less: Deductions available other than the overall limit of Rs. 1,50,000/- under section 80CCE|
|Under section 80CCD(1B) (additional deduction up to Rs. 50,000/-)||50,000|
|Under Section 80CCD(2) (employer’s contribution up to 10% of Salary)||1,60,000|
|Less: Deductions available within the overall limit of Rs. 1,50,000/- under section 80CCE|
|Section 80CCD(1) [total employee’s contribution – allowed under section 80CCD(1B)]||55,000|
|Total (C) (Limited to 1,50,000 only)||1,60,000||1,50,000|
|Net Income (A-B-C)||12,40,000|