Nps contributions - income tax benefits

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Anoop kumar (Querist)

18 January 2015 I am making contribution of 10% of my salary(Basic+DA) towards NPS and same 10 % equal contributions is made by my employer(Central Govt.) in my NPS Tier 1 account.my question is that.

1. Can i take benefit of both contribution for income tax deduction U/S 80CCD(1) & (2)??

2. what is maximum deduction benefit is available under income tax for NPS contributions??

3. whether contribution under section 80CCD(2) first added to gross salary , then after deductions is available or just deduction no additions ??

CMA MALHAR BEHERA

CMA MALHAR BEHERA (Expert)

18 January 2015 1. Circular No-1 /2010 dated 11th Jan’2010 issued on the subject of Deduction of Tax at Source etc. clarifies that in accordance with the provisions of Section 80 CCD, deduction in respect of contribution made by an individual in the previous year to his account under a pension scheme notified, is allowed in computation of his total income -
(a) In the case of an employee, ten per cent of his salary in the previous Year; and
(b) In any other case, ten per cent of his gross total income in the Previous year.
2. It further clarifies that where the Central Government or any other Employer makes any contribution to the account of employee for the pension scheme, the assessee shall also be allowed a deduction in the computation of his total income of the whole of the amount contributed by the Central Govt. or any other employer as does not exceed 10% of his salary in the previous year.

Note-Point that needs clarification is that whether contribution made by Central Government or other employer needs to be added to the income of the assessee before allowing deduction or not.First it should be added and then deduction u/s 8OCCD should be allowed.

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