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Vilas (Retired Bank Official)     23 July 2021

Contribution made towards NPS

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. 



 5 Replies

CA Rashmi Gandhi

CA Rashmi Gandhi (Chartered Accountant)     24 July 2021

Even if employer did not contribute , you are eligible for 50000 deduction u/s 80CCD(1B)
Vilas

Vilas (Retired Bank Official)     24 July 2021

Thank you for clarification. My question is whether investment in NPS for claiming benefit under 80CCD(1B) should be over and above 10% of Salary as mentioned in Sec 80CCD. Suppose employee's Gross Income is Rs. 6.50 lakh. He has invested Rs. 50,000.00 in Tax Saving FD, Rs. 40,000.00 towards PF, Rs. 50,000.00 in LIC- Total Rs. 1,40,000.00. In addition to this he has contributed Rs. 40,000.00 in NPS. Here whether this total amount i.e. Rs. 40,000.00 can be considered  as investment under Sec 80CCD(1B) or whether only amount in excess of 10% of salary is eligible for taking benefit of Sec. 80CCD(1B). 

CMA Poornima Madhava

CMA Poornima Madhava (CMA)     24 July 2021

40k towards tier 1 account can be claimed as deduction under section 80CCD(1B) in addition to 140k u/s 80C.

debora M

debora M (BUSINESS DEVELOPMENT MANAGER)     04 August 2021

 

To encourage investment in NPS, Section 80CCD(1B) of the Income-tax Act allows an additional deduction of Rs 50,000 over and above the Rs 1.5 lakh available under Section 80CCE. *It is assumed that contribution to NPS by the employee does not exceed 10% of the employees' salary

CA Rashmi Gandhi

CA Rashmi Gandhi (Chartered Accountant)     07 August 2021

Limit of 10% not applicable u/s 80 CCD(1B). See below link

https://cleartax.in/s/section-80-ccd-1b


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