Section 80CCD and 80CCE of the Income Tax Act, 1961

• Taxation
• ||
• July 2, 2021

The Finance Act 2015 inserted a new subsection (IB) under Section 80CCD of the Income Tax Act to stimulate investment in NPS by any individual by permitting an additional deduction of INR 50,000 over and above the INR 1.5lakhs available under Section 80CCE of the Act. However, the way this sub-section is drafted seems to be ambiguous. Under this scenario, the additional INR 50,000 is eligible for the deduction, and experts to appear dividend on this.

Section 80CCD
Section 80CCD deals with the deduction available to individuals against contributions made to the National Pension Scheme (NPS) or the Atal Pension Yojana (APY). NPS is a notified pension scheme from the Central Government. Contributions made by the employers with regards to the NPS also come under this section.

Accessibility of Section 80CCD

• The employee of Central Government or other employers; and
• An Individual

Maximum deduction under Section 80CCD

1. Self -Contribution under Section 80CCD(1)
   Where a person employed by the CG (Central Government) or any other employer or self-employed individual has deposited any amount under a notified pension scheme, he can claim a deduction of:

• The amount deposited; or
• 10% of salary (in case of an employee); or
• 20% of Gross Total Income (GTI) in case of self-employed person; or
• Amount of Rs. 1,50,000

  Additional deduction under section 80CCD (1B) of Rs.50,000 is prescribed in respect of the amount deposited by an individual assessee under Notified Pension Scheme (NPS) in the previous year, whether or not any deduction is allowed u/s 80CCD (1). But any amount allowed deduction u/s 80CCD (1) shall not be allowed deduction u/s 80CCD (1B).

2. Employer’s Contribution under Section 80CCD(2)
   Where the employer makes any contribution to his account, the assessee can claim a deduction of:

• Amount contributed by the employer; or
• 14% of the salary of the employee (in case contribution made by Central Government); or
• 10% of the salary in case of a contribution made by any other employer of the employee
  Salary for the above purpose shall mean basic salary + dearness allowance (under terms of employment) only. It shall be noted that the total contribution made by the employer is included in the employee’s salary. Then the deduction is allowed only up to 10% of salary/ 14% of salary.

3. Section 80CCD(IB)

• An additional tax benefit of Rs. 50,000 is possible under Section 80CCD (IB) for investments made in the NPS. Thus, the total tax savings can go up to Rs. 2 00,000.
• An amount received back in the previous year shall be taxable in the year of receipt. However, if such an amount is used for purchasing an annuity plan in the same year, it will not be taxable.

Section 80CCE
Section 80CCE permits individuals to deduct up to INR 1.5 lakh from their total gross income (before calculating tax payable) if this INR 1.5 lakh is perfused in described direction. In addition, certain specified expenditures also qualify for deduction under this INR 1.5 lakh limit of section 80CCE.

Limit on deduction under section 80C, 80CCC, and 80CCD
Total deduction under section 80C, 80CCC, and 80CCD (1) (except contribution by assesse under section 80CCD (1B) & contribution by employer) cannot exceed Rs. 1, 50,000.

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