In the Finance Act-2015 a new sub-section 1B to section 80CCD in the Income Tax Act-1961 was inserted whereby an additional deduction of Rs. 50,000/- is offered to the taxpayer for contribution in the National Pension Scheme (NPS). This deduction is over and above the deduction of Rs. 1.50 Lac available u/s 80C for contribution in LIC/PPF/NSC etc. Deduction of Rs 50,000/- under 80CCD (1B) is exclusively for investments in NPS and cannot be availed against any other investment. NPS is a voluntary pension scheme regulated by Pension Fund Regulatory and Development Authority (PFRDA).
Any citizens of India between 18 – 60 years of age, whether resident or non-resident, are eligible to subscribe NPS.
Tax Benefit:
Tax benefit is one of the key consideration for arriving at an investment decision. The tax benefits of NPS are as under:
1. Employee Contribution is eligible for deduction u/s 80CCD (1) subject to overall maximum cap of Rs. 1.50 Lacs admissible u/s 80C.
2. Employer Contribution is also allowed as deduction in the computation of total income of the employee to the extent that it does not exceed 10% of employee’s salary. Deduction of employer contribution is available over & above the deduction of Rs. Rs. 1.50 Lacs as mentioned in (1) above.
3. Self Employed and others: In addition to deduction as mentioned in (1) & (2) above, an additional deduction of Rs. 50,000/- is also provided u/s 80CCD (1B) for contribution in NPS. It is over and above & is in addition to deduction u/s 80C. Deduction from income simply means that, higher the tax bracket- higher the benefit, lower the tax bracket- lower is the benefit. But benefit is there if an individual has taxable income. For example, an individual in the 30% tax bracket could save tax of Rs. 15,450/- whereas those in 20% & 10% tax bracket would be able to save tax of Rs. 10,300/- & Rs. 5,150/- of the tax amount respectively.
Refer a picture below:-
Tax Benefit:
Tax benefit is one of the key consideration for arriving at an investment decision. The tax benefits of NPS are as under:
1. Employee Contribution is eligible for deduction u/s 80CCD (1) subject to overall maximum cap of Rs. 1.50 Lacs admissible u/s 80C.
2. Employer Contribution is also allowed as deduction in the computation of total income of the employee to the extent that it does not exceed 10% of employee’s salary. Deduction of employer contribution is available over & above the deduction of Rs. Rs. 1.50 Lacs as mentioned in (1) above.
3. Self Employed and others: In addition to deduction as mentioned in (1) & (2) above, an additional deduction of Rs. 50,000/- is also provided u/s 80CCD (1B) for contribution in NPS. It is over and above & is in addition to deduction u/s 80C. Deduction from income simply means that, higher the tax bracket- higher the benefit, lower the tax bracket- lower is the benefit. But benefit is there if an individual has taxable income. For example, an individual in the 30% tax bracket could save tax of Rs. 15,450/- whereas those in 20% & 10% tax bracket would be able to save tax of Rs. 10,300/- & Rs. 5,150/- of the tax amount respectively.
Refer a picture below:-
Details of NPS scheme can be found at this link npscra.nsdl.co.in
Further vide notification 7/2016 dated 19th February, 2016 Atal Pension Yojana(APY) is also covered under 80CCD. The copy of the Notification is given below.
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
Notification No. 7/2016
New Delhi, Date: 19th February, 2016
Income-tax
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
Notification No. 7/2016
New Delhi, Date: 19th February, 2016
Income-tax
S. O. 529(E).- In exercise of the powers conferred by sub-section (1) of section 80CCD of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies the ‘Atal Pension Yojana (APY)’ as published in the Gazette of India, Extraordinary, Part I, Section 1, vide number F.No. 16/1/2015-PR dated the 16th October, 2015 as a pension scheme for the purposes of the said section.
2. This notification shall come into force from the date of its publication in the Official Gazette.
2. This notification shall come into force from the date of its publication in the Official Gazette.
[F.No.173/394/2015-ITA-I]
DEEPSHIKHA SHARMA, Director
DEEPSHIKHA SHARMA, Director
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