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Deduction in respect to contribution to pension scheme

CA Basant Patawari 
on 13 May 2015

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Deduction in respect to contribution to pension scheme ( NPS) notified by central Government  ( Sec 80CCD ) -  Assessment Year 2016-17

Conditions – Section 80 CCD is applicable if the following conditions are satisfied –

1. The Taxpayer is an individual. That means this deduction is not available to HUF.  

2. Any working person can take the benefit of this section i.e. both the self employed or salaried person are entitled to take the benefit of this section.

3. He has in the previous year paid or deposited any amount in his account under the pension scheme notified by the Central Government ( NPS).  

Category – Salaried  

Paid by the Employee himself – The Contribution to NPS is deductible under section 80CCD(1) in the year in which the contribution is made.

This is subject to the maximum of 10% of the salary of the employee. Salary for this purpose would include Dearness Allowance and Commission ( if it is payable as a percentage of the turnover achieved by the employee) but excludes all other allowances and perquisites.

Maximum Permissible deduction under the above category is Rs. 50,000 which is in addition of the ceiling under section 80CCE of Rs. 1,50,000. That means a person can claim a deduction of Rs. 1,50,000 + Rs. 50,000 = Rs. 2,00,000 taking into account both the sections.

Paid by the Employer -  If the employer makes the payment for NPS for the employee, then the employee concerned can take the benefit of the contribution so made.

Subject to the maximum of 10% of the salary of the employee , he can take the benefit in this section without any limit.

Category – Self Employed  

In case of Self Employed Person, any contribution to NPS is deductible subject to maximum of 10% of his Gross Total Income.

Maximum Permissible deduction under the above category is Rs. 50,000 which is in addition of the ceiling under section 80CCE of Rs. 1,50,000. That means a person can claim a deduction of Rs. 1,50,000 + Rs. 50,000 = Rs. 2,00,000 taking into account both the sections.

Payment Received from the National Pension Scheme

The amount received from the NPS on the closure of the same or the persons opting out of the scheme  or the amount received as pension from the annuity so invested is taxable in the year in which the amount is received back by the asssessee ( or his nominee )

If however the amount is invested again in purchasing the annuity in the previous year, then the same will be exempt from tax. 

Conditions – Section 80 CCD is applicable if the following conditions are satisfied –

1. The Taxpayer is an individual. That means this deduction is not available to HUF.  

2. Any working person can take the benefit of this section i.e. both the self employed or salaried person are entitled to take the benefit of this section.

3. He has in the previous year paid or deposited any amount in his account under the pension scheme notified by the Central Government ( NPS).  

Category – Salaried  

Paid by the Employee himself – The Contribution to NPS is deductible under section 80CCD(1) in the year in which the contribution is made.

This is subject to the maximum of 10% of the salary of the employee. Salary for this purpose would include Dearness Allowance and Commission ( if it is payable as a percentage of the turnover achieved by the employee) but excludes all other allowances and perquisites.

Maximum Permissible deduction under the above category is Rs. 50,000 which is in addition of the ceiling under section 80CCE of Rs. 1,50,000. That means a person can claim a deduction of Rs. 1,50,000 + Rs. 50,000 = Rs. 2,00,000 taking into account both the sections.

Paid by the Employer  -  If the employer makes the payment for NPS for the employee, then the employee concerned can take the benefit of the contribution so made.

Subject to the maximum of 10% of the salary of the employee , he can take the benefit in this section without any limit.

Category – Self Employed  

In case of Self Employed Person, any contribution to NPS is deductible subject to maximum of 10% of his Gross Total Income.

Maximum Permissible deduction under the above category is Rs. 50,000 which is in addition of the ceiling under section 80CCE of Rs. 1,50,000. That means a person can claim a deduction of Rs. 1,50,000 + Rs. 50,000 = Rs. 2,00,000 taking into account both the sections.

Payment Received from the National Pension Scheme

The amount received from the NPS on the closure of the same or the persons opting out of the scheme  or the amount received as pension from the annuity so invested is taxable in the year in which the amount is received back by the asssessee ( or his nominee )

If however the amount is invested again in purchasing the annuity in the previous year, then the same will be exempt from tax. 


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