As per the Income Tax Circular No.17/2014, the Income Tax Section 80CCD(1) and 80CCD(2) definition :-
Section 80CCD(1) allows an employee, being an individual employed by the Central Government or by any other employer on or after 01.01.2004, or any other assessee being an individual, a deduction of an amount paid or deposited out of his income chargeable to tax under a pension scheme as notified vide Notification F. N. 5/7/2003- ECB&PR dated 22.12.2003 (National Pension System –NPS) or as may be notifed by the Central Government. However, the deduction shall not exceed an amount equal to 10% of his salary (includes Dearness Allowance but excludes all other allowance and perquisites). The deduction under section 80CCD(1) shall not exceed Rs. 1,00,000/-.
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As per Section 80CCD(2), where any contribution in the said pension scheme is made by the Central Government or any other employer then the employee shall be allowed a deduction from
his total income of the whole amount contributed by the Central Government or any other employer subject to limit of 10% of his salary of the previous year.
If any amount is standing to the credit of the employee in the pension scheme referred above and deduction has been allowed as stated above, and the employee or his nominee receives this amount together with the amount accrued thereon, due to the reason of
(i) Closure or opting out of the pension scheme or
(ii) Pension received from the annuity plan purchased and taken on such closure or opting out
then the amount so received during the FYs shall be the income of the employee or his nominee for that Financial Year and accordingly will be charged to tax.
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Where any amount paid or deposited by the employee has been taken into account for the purposes of this section, a deduction with reference to such amount shall not be allowed under section 80C.
Further it has been specified that w.e.f 01.04.09 that any amount received by the employee from the new pension scheme shall be deemed not to have received in the previous year if such amount is used for purchasing an annuity plan in the same previous year.
It is emphasized that as per the section 80CCE the aggregate amount of deduction under sections 80C, 80CCC and Section 80CCD(1) shall not exceed Rs.1,50,000/-. However, the deduction under Section 80CCD(1)shall not exceed Rs.1,00000 but contribution made by the Central Government or any other employer to a pension scheme u/s 80CCD(2) shall be excluded from the limit of Rs.1,00,000/- provided under this Section.
