What is Section 80-CCD?
Updated on : Aug. 25, 2022 - 5 p.m. 17 min read.
Section 80CCD of the income tax act deals with deductions offered to individuals contributing to the NPS. As per Section 80CCD, until the year 2015, an individual was eligible to claim an income tax deduction of up to Rs. 1 lakh against contributions made to the NPS, which offered an additional deduction of up to Rs. 50,000/-for contributions made by individual taxpayers towards the NPS. The additional deduction of Rs. 50,000/- under Section 80CCD(1B) is available to assess over and above the benefit of Rs. 1.50 Lakhs available as a deduction under Sec 80CCD (1).
Investments come under section 80-CCD:
Section 80CCD of the Income Tax Act covers the following list of investments that can be claimed for income tax deductions. You can claim these deductions when filing your income tax returns.
- All the funds paid towards the National Pension Scheme and Atal Pension Yojana by individuals are eligible for tax deductions under Section 80CCD.
- All the funds paid by employers for their employees towards the National Pension Scheme.
- Any self-employed or salaried individual who pays towards the National Pension Scheme or Atal Pension Yojana is eligible under Section 80CCD.
- Any company or corporation that pays for their employees towards the National Pension Scheme is eligible under Section 80CCD.
- In order to be eligible for Section 80CCD deductions under NPS Tier 1 Account, a minimum of Rs 6,000 annually or Rs 500 monthly must be contributed to the NPS.
- In order to be eligible for Section 80CCD deductions under NPS Tier 2 Account, a minimum of Rs 2,000 annually or Rs 250 per month must be contributed to the NPS.
Section 80- CCD deductions and limit:
Income tax deduction for contributions made by individuals to eligible NPS (chart)
Section 80- CCD(1):
This section deals with providing tax deductions to all assesses whether employed by the government, any other employers, or self-employed individuals. The deduction is limited to a maximum of 10% of salary (basic + dearness allowance only) in the case of salaried employees and 10% of gross income in the case of self-employed taxpayers. The deduction limit cannot exceed Rs.2 lakh in a fiscal year
Section 80- CCD(2):
This section deals with the employer's contribution toward an employee’s NPS funds. 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.
Section 80- CCD 1(B):
In the Union Budget of 2015, the government introduced a new subsection to Section 80CCD as an amendment - Section 80CCD(1B). This was done to boost the investment in NPS and Atal Pension Yojana schemes. As per Section 80CCD(1B), individuals who are employees or self-employed can claim an additional deduction of ₹ 50,000 when they contribute to NPS or Atal Pension Yojana. This deduction is over and above the amount that can be claimed under Section 80CCD (1).