New pension scheme

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

17 August 2013 For the govt employees where do we show the NPS employee contribution for tax calculation? Is it under Chapter VI A and restricted to maximum of Rs. 1 lakh ? Is it needed to show the NPS employer contribution in IT Return and where do we show it ?

Querist : Anonymous

Querist : Anonymous (Querist)

26 August 2013 please help

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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04 August 2024 Under the New Pension Scheme (NPS), the treatment of employee and employer contributions for tax purposes is as follows:

### **1. Employee Contribution**

- **Tax Benefit under Section 80CCD(1)**: Contributions made by employees to the NPS are eligible for tax deduction under Section 80CCD(1) of the Income Tax Act. This deduction falls under Chapter VI-A of the Income Tax Act.
- **Limit**: The maximum amount eligible for deduction under Section 80CCD(1) is ₹1.5 lakh. This includes contributions under both Section 80C (which also has a ₹1.5 lakh limit) and Section 80CCD(1). Hence, the overall limit for both Sections combined is ₹1.5 lakh. However, contributions to NPS beyond ₹1.5 lakh qualify for an additional deduction.

- **Additional Deduction under Section 80CCD(1B)**: Contributions to NPS are eligible for an additional tax benefit under Section 80CCD(1B), which provides an extra deduction of up to ₹50,000. This is over and above the ₹1.5 lakh limit under Section 80C and Section 80CCD(1).

**Example**:
- If your total contribution to NPS is ₹70,000, you can claim a deduction of ₹70,000 under Section 80CCD(1) and ₹50,000 under Section 80CCD(1B) in addition to the ₹1.5 lakh limit under Section 80C.

### **2. Employer Contribution**

- **Tax Benefit under Section 80CCD(2)**: Employer contributions to the NPS are also eligible for tax benefits under Section 80CCD(2).
- **Limit**: The deduction for employer contributions is up to 10% of the salary (basic + DA), and this is in addition to the limit of ₹1.5 lakh under Section 80C and ₹50,000 under Section 80CCD(1B). The employer’s contribution is not subject to the ₹1.5 lakh cap under Section 80C.

**Note**: Contributions by the employer are excluded from the taxable income of the employee and are directly exempted.

### **Where to Show in the Income Tax Return**

- **Employee Contribution**:
- **ITR Form**: In the Income Tax Return (ITR) form, employee contributions to NPS are shown under the section for deductions under Chapter VI-A. Specifically:
- For ITR-1: In the section for deductions under Chapter VI-A, fill in the details for Section 80CCD(1) and Section 80CCD(1B).
- For other ITR forms: Similar sections will be available for entering deductions.

- **Employer Contribution**:
- **ITR Form**: Employer contributions are not directly shown in the employee's tax return as they are exempt from tax and do not form part of the employee’s taxable income. However, you should ensure that the contribution details are reflected in Form 16 or Form 26AS (Tax Credit Statement) provided by the employer.

### **Summary**

1. **Employee Contribution**:
- Deductible under Section 80CCD(1) and 80CCD(1B).
- Maximum ₹1.5 lakh under 80CCD(1) (combined with 80C) and an additional ₹50,000 under 80CCD(1B).
- Enter in the ITR form under Chapter VI-A.

2. **Employer Contribution**:
- Deductible under Section 80CCD(2).
- Not subject to the ₹1.5 lakh limit and is not shown in the ITR directly but should be reflected in Form 16/Form 26AS.

Ensure to check your specific ITR form for accurate entry points and limits, and refer to the latest Income Tax guidelines or consult a tax professional if needed.

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