Section 80CCD – Additional deduction for national pension system contribution


Under the existing provisions contained in sub-section (1) of section 80CCD of the Income-tax Act, 1961 if an individual, employed by the Central  Government on or after 1st January, 2004, or being an individual employed by any other employer, or any other assessee being an individual has paid or deposited any amount in a previous year in his account under a notified pension scheme, a deduction of ten percent of his salary in the case of an employee and ten percent of the gross total income in case of any other individual is allowed. Similarly, the contribution made by the Central Government or any other employer to the said account of the individual under the pension scheme is also allowed as deduction under sub-section (2) of section 80CCD, to the extent it does not exceed ten per cent. of the salary of the individual in the previous year.

Sub-section (1A) of section 80CCD provides that the amount of deduction under sub-section (1) shall not exceed one hundred thousand rupees. Till date, under section 80CCD, only the National Pension System (NPS) has been notified by the Ministry of Finance.

With a view to encourage people to contribute towards NPS, it is proposed to omit sub-section (1A). In addition to the enhancement of the limit under section 80CCD(1), it is further proposed to insert a new sub-section (1B) so as to provide for an additional deduction in respect of any amount paid, of upto fifty thousand rupees for contributions made by any individual assessees under the NPS. Consequential amendments are also proposed in sub-section (3) and sub-section (4) of section 80CCD.

These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.

Clause 17 of Finance Act 2015

In section 80CCD of the Income-tax Act, with effect from the 1st day of April, 2016,-—

(a) sub-section (1A) shall be omitted;

(b) after sub-section (1A), as so omitted the following sub-section shall be inserted, namely:—

“(1B) An assesse referred to in sub-section (1), shall be allowed a deduction in computation of his total income, [in addition to the deduction allowed under sub-section (1)], of the whole of the amount paid or deposited in the previous year in his account under a pension scheme notified or as may be notified by the Central Government, which shall not exceed fifty thousand rupees:

Provided that no deduction under this sub-section shall be allowed in respect of the amount on which a deduction has been claimed and allowed under sub-section (1);

(c) in sub-section (3),

(I) for the words, brackets and figure, “sub-section (1)”, wherever they occur, the words, brackets, figures and letter “sub-section (1) or sub-section (1B)” shall be substituted;

(II) for the words “under that sub-section”, the words “under those sub-sections” shall be substituted;

(d) in sub-section (4),  for the words, brackets and figure, “sub-section (1)”, the words, brackets, figures and letter “sub-section (1) or sub-section (1B)” shall be substituted.

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