This document discusses tax deductions available under Section 80CCD for contributions made to pension schemes like the National Pension Scheme (NPS). Section 80CCD allows: 1) Deductions up to 10% of salary or gross income, capped at Rs. 1.5 lakhs. 2) An additional deduction of up to Rs. 50,000 for NPS contributions under Section 80CCD(1B), bringing the total cap to Rs. 2 lakhs. 3) Employer contributions to NPS are also deductible up to 10% of the employee's salary with no upper limit. Deductions under Section 80CCD are available for both employees and self-employed

1. Section 80 CCD
Presented by: Miss Dhanashri Durgaram Shet
Tax deductions for
contribution to the pension
schemes

2. Introduction
This section provides tax deductions for contribution to the pension
schemes notified by Central Government, i.e., National Pension
Scheme (NPS) & Atal Pension Yojana (APY).
There are two parts of this section namely:
80 CCD
80 CCD 1
80 CCD (1B)
80 CCD 2

3. Section 80CCD(1): (By Assessee)
This part applies to all the individual tax payers who are
employed by the Central Government/any other employer
or any other individual assessee.
All citizens of India between the ages of 18 and 60 years
can contribute to NPS on a voluntary basis.
A Non-Resident Individual can also contribute to NPS. This
Scheme can be participated in addition to PPF and EPF.

4. Under this section, maximum deduction allowed is:
 up to 10% of salary for salaried employee; (basic +
dearness allowance only)
 and 10% of gross income for other taxpayer who is not
under salaried employment.

5. 80 CCD Part (1B) provides additional deduction of Rs. 50,000 for
contribution made by an assessee under NPS.
Note: the maximum deduction as an aggregate of section 80 C,
80 CCC & 80CCD(1) should not exceed Rs. 1,50,000 but after
including section 80 CCD(1B), total deduction limit becomes Rs.
2,00,000.
Here salary means (basic pay + dearness allowance)

6. Section 80CCD(2): (By Employer)
Deduction is also allowed to an employee if his employer makes
contribution to employee’s account in the pension scheme of Central
Government.
Employees can claim this amount as deductions u/s Section 80CCD
(2). The amount of deduction is limited to 10% of the employee’s
salary.
There is no monetary ceiling on this deduction.

8. • Eligibility for Claiming Section 80CCD
Deductions:
1. Individual taxpayers, both salaried and self-
employed can claim deductions under this
section.
2. Deductions can also be claimed on employer
contributions towards NPS.
HUFs are ineligible for deductions
under this section.

9. Terms for Claiming Section 80CCD Deductions:
 Deductions are applicable on contributions made to the National
Pension Scheme (NPS) by salaried and self-employed individuals
as well as their employers.
 10% of salary (basic + dearness allowance) or 10% of gross
income (self-employed) can be claimed as maximum deduction
subject to an upper ceiling of Rs.1.5 lakhs.
 From FY 2016-17, additional deduction of up to Rs.50,000 is
available for contributions by individuals towards NPS under
sub-section 1B, taking the total deductions to Rs.2 lakhs per year.
 Any deductions claimed u/s 80CCD cannot be claimed again u/s
80C.

10. Total deduction limit – Section 80C + Section 80CCD = Rs.2
lakhs.
The proceeds from the pension fund whenever released such as
for monthly pension payment or surrendered accounts will be
taxable under respective income tax brackets.
 If the funds released from NPS are reinvested in an annuity plan,
no income tax has to be paid on the redeemed amount.
 Deductions u/s 80CCD (1) are limited to Rs.1 lakh per year,
while the deductions u/s 80CCD (2) can be claimed over and
above this limit, subject to a maximum deduction of Rs.1.5 lakhs.

12. NPS has two Tiers – 1 and 2.
NPS Tier 1 is the long term investment, which has restricted withdrawals and
meant primarily for retirement planning. On maturity, you can withdraw
maximum of 60% of corpus as lump sum and rest has to be used for annuity
purchase.
NPS Tier 2 is for managing short to medium term investment. You can invest
and withdraw anytime as per your wish. This is an optional feature and you
are asked if you need Tier 2 account while opening NPS.
All the tax benefit related to NPS is
available to investment in NPS Tier 1
account only.

13. Savings via NPS – An Example

14. Form 16

15. References:
• https://cleartax.in/s/80c-80-deductions
• https://www.bankbazaar.com/tax/section-80ccd.html
• http://economicstimes.indiatimes.com/wealth/tax/experts-differ-on-how-to-
claim-additional-nps-tax-benefit-under-section-80ccd-
1b/articleshow/51952963.cms
• https://www.hrblock.in/guides/section-80ccd-taxdeduction-nps-apy.aspx
• http://apnaplan.com/nps-tax-benefit/
• https://taxguru.in/income-tax/sec-80ccd-additional-deduction-national-
pension-system-contribution.html