Contribution made towards NPS

Vilas (Retired Bank Official) (147 Points)

23 July 2021  

Section 80CCD (1): This section deals with providing tax deductions to all assessees whether employed by the government, any other employers or self-employed individuals. The deduction is limited to a maximum of 10% of salary (basic + dearness allowance only) in case of salaried employees and 10% of gross income in case of self-employed taxpayers.

Section 80 CCD (1B) which allows a further deduction of INR 50,000, over and above the deduction available under Section 80C for INR 1.5 lakhs. The deduction under Section 80 CCD (1B) is allowed if you invest towards the National Pension Scheme (NPS) offered by the Government of India.

My question is regarding claiming deduction towards contribution made in NPS by a salaried person whose employer is not deducting any amount from employee's salary and not contributing any amount towards NPS, but the employee contributes to NPS directly on his own. In this case whether this amount can be claimed as additional deduction under 80CCD (1B) as the limit of Rs. 1.50 lakh under Sec 80C is over with contribution towards PF, LIC, investments in Tax savings FD & MF or it will be part of 80CCD Salary of the employee is Rs. 6.50 lakh during the year and he has contributed Rs. 40,000/- in NPS directly on his own.