Section 80CCD

Deduction in respect of contribution to pension scheme notified by the Central Government

Pension Scheme of Central Government:
As per the “Restructured Defined Contribution Pension System” applicable to new entrants to Government service, it is mandatory for persons entering the service of the Central Government on or after 1st January, 2004, to contribute 10% of their salary every month towards their pension account. A matching contribution is required to be made by the Government to the said account.

The benefit of this scheme is also available to individuals employed by any other employer as well as to self-employed individuals.

Quantum of deduction:

1. Section 80CCD (1) Employee’s contribution is allowed to an individual who makes deposits to his/her pension account.
   • Maximum deduction allowed is 10% of salary (in case the taxpayer is an employee) or
   • 20% of gross total income (in case the taxpayer being self-employed)
2. Section 80CCD(1B) provides for an additional deduction of up to Rs 50,000 in respect of the whole of the amount paid or deposited by an individual assessee under National Pension System(NPS) in the previous year, whether or not any deduction is allowed under section 80CCD(1).
3. Section 80CCD (2) Employer’s contribution to NPS is an Additional deduction allowed to employee’s pension account of up to 10% of the salary of the employee. There is no monetary ceiling on this deduction.

Note :

• As per Section 80CCE, the aggregate amount of deduction under section 80C,  80CCC and 80CCD(1) to Rs 1,50,000.
• It may be noted that the deduction of upto 50,000 under section 80CCD(1B) and employer’s contribution  to  pension scheme, allowable as deduction under section 80CCD(2) in the hands of the employee, would be outside the overall limit of Rs 1,50,000  stipulated  under section 80CCE.
• “salary” includes basic salary and dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.