NPS Tax Relief Section: Section 80CCD of the Income Tax Act, 1961, allows deduction for contributions to pension schemes notified by the Central Government. This section mainly deals with the National Pension System (NPS) and Atal Pension Yojana (APY). Section 80CCD(1) and 80CCD(1B) sections provide tax benefits for saving for your retirement. You can claim deductions for contributions to NPS and APY, with a total maximum limit of Rs 2 lakh (including an additional deduction of Rs 50,000 under Section 80CCD(1B)). It is important to consider your salary/income and chosen tax regime while maximising these deductions. What schemes are covered under Section 80CCD? National Pension System (NPS): It is a voluntary pension scheme offered by the government.
Atal Pension Yojana (APY): It is a government-sponsored pension scheme targeted at the economically weaker sections.
- Section 80CCD(1) This section deals with individual contributions to NPS, including:
Self-employed individuals: The deduction is limited to 20% of gross total income.
Salaried individuals: The deduction is limited to 10% of salary (basic + DA). - Section 80CCD(1B)
This section provides an additional deduction for contributions up to Rs 50,000 to NPS. This is over and above the limit of Rs 1.5 lakh available under Section 80C. - Section 80CCD(2)
This section deals with employer contributions to NPS:
The deduction for salaried employees is limited to 10% of salary (basic + DA).
This benefit is not available to self-employed individuals.
The benefits available under Section 80CCD vary depending on the tax regime you choose:
Old tax regime: You can avail the full benefit of both Section 80CCD(1) (up to Rs 1.5 lakh) and the additional deduction under Section 80CCD(1B) (up to Rs 50,000), allowing a maximum deduction of Rs 2 lakh for NPS contributions.
New tax regime: However, if you choose the new income tax regime, you will have to forgo the deductions available under Section 80CCD(1) and Section 80CCD(1B). However, you can still claim income tax deduction for contributions to NPS under Section 80CCD(2) in the new regime.
