Section 80 CCD: Deduction for NPS Contribution |Chapter-A of the Income-tax Act provides for various exemptions for contributions to pension schemes. These exemptions are available under Section 80C, Section 80CCC, and Section 80CCD and can be claimed at the time of filing an income tax return. This article focuses primarily on exemptions approved under Section 80 CCD. For exemptions under Section 80C and Section 80CC.
Deduction under 80 CCD
There is a provision of 80 CCD for exemption of income tax for contributions to the National Pension Scheme (NPS) and for contributions to the notified pension scheme. Discounts under this section are available to individuals only and not to HUFs. Individual claims under this section may be residential or non-residential.
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Section 80 CCD (1): Grant of NPS Scheme for Contribution by Individual
Exemption under Section 80CCD (1) is not only available to salaried persons; salaried persons can also contribute to the NPS scheme and get relief for the same.
The maximum amount allowed as exemption under Section 80CCD (1) is: -
In case of employees: 10% of his salary for the financial year (salary includes value-added allowance but excludes all other allowances and permits)
In case of non-employees: 10% of total income in F..Y (increased from F.Y 2017 to 20%)
Section 80 CCD 2015 Budget Amendment
Earlier, the amount of exemption allowed for contributions to NPS was limited to Rs 1 lakh [Section 80 CCD Sub-section 1A]. However, to encourage people to contribute to the NPS, the maximum amount allowed to be invested in the National Pension Scheme has been increased from Rs 1 lakh to Rs. 1.5 lakh.
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In addition, a new sub-section 1 B has been introduced in the budget 2015 announced by Arun Jaitley to provide additional discounts for any amount payable, for which Rs. 50,000 50,000 for contributions by any individual assessors under NPS.
This is an additional advantage. Benefits above Rs 50,000 and above. A rebate of Rs 1.5 lakh can be claimed under Section 80C. Therefore, it can now be claimed under Section 80C + Section 80CCD that the total exemption. 2 lakh rupees.
Section 80 CCD (2): Deduction on NPS scheme for contribution by employer
If an employer contributes to the NPS scheme on behalf of the employee and is availed by the employee, the amount under which the employer contributes by the employee may also be waived under section 80CCD (2).
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The contribution made by the employee himself in the NPS scheme will be allowed as a discount under section 80 CCD (1) and the contribution made by the employer in the NPS scheme will be approved as a discount under section 80CCD (2).
The concession approved under section 80CCD (2) will be allowed for the contribution of employers up to 10% of the salary of the individual.
Receives tax refunds on money from the National Pension Scheme
The contribution made by the NPS scheme will be returned to the employee as a pension after retirement or by surrendering the policy (as it may be).
At the time of withdrawal from the NPS account, 60% of the accumulated balance can be withdrawn and he will be exempted from tax. An annuity will be purchased from the balance of 40% amount.
Budget 2017 Update: Exemption will also, be allowed for partial withdrawal without exceeding 25% of the contribution made by the employee under certain conditions under the Pension Fund Control and Development Authority Act.
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