Contribution to certain pension funds are covered in this section

This contribution may be made by an Individual 

The individual may be 

Employed (i.e. in job)

or

Self employed (i.e. in business)

 

Deduction is as follows

 

In case of job (Individual is employed)

Both employee and employer contribute towards this scheme

Max deduction is

10% of Basic + DA for employee (Section 80CCD (1) )

and

10% of Basic + DA for employer (Section 80CCD (3) )

 

In case of person not in job (example- self-employed)

Only he contributes as there is no employer

Max deduction is

10% of Gross Total income (GTI) (80CCD(1)

 

Note:-

  1. Overall limit of 80C+80CCC+ 80CCD (1)  cant be more than Rs 150000.(Note:-Maximum limit of 150000 applies to employees contribution and not employers contribution)
  2. If deduction claim under 80C regarding annuity plan then deduction cannot be claimed again under this section.

 

New Amendment

Subsection   80CCD (1B)

Maximum deduction of Rs 50000 under this section for contribuition to NPS

This is in addition to above mentioned limits of 10% or overall limit of Rs 1500000

Hence,it is always beneficial for assessee to first claim Rs 50000 deduction under Section 80CCD (1B) and balance under Section 80CCD (1)

 

Summary
Section 80CCD Contribution to Notified Pension Schemes(NPS) - Deductions for Individuals

Taxable on Withdrawal

Amount received from pension find shall be taxable in the year received.

This amount may be in the form of

  • Pension
  • Lump sum amount on surrender of pension fund.

However if amount withdrawn for purchasing annuity plan, then not taxable

  1. Income Tax
  2. Deductions Under Chapter VIA
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Davneet Singh
Davneet Singh is a graduate from Indian Institute of Technology, Kanpur. He has been teaching from the past 8 years. He provides courses for Maths and Science at Teachoo. You can check his NCERT Solutions from Class 6 to 12.