Save Rs 588 on a 2-Year Ad-Free CAclubindia Pro Membership. Subscribe Now!

I have doubt with 80ccd(2) of income tax act,

818 views

Save Share

Join Us Follow Us Add as Source

naveen gowda

23 Points Posted on 23 February 2021

Hi Everyone,

I have doubt with 80ccd(2) of income tax act,

Is it applicable for state /central government employee where 10% is basic+DA invested in NPS and govt/employer contributes 14% of it but while calculating Income tax return ,employer/govt contribution not included in gross salary of employee , can we claim 80ccd(2) of income tax benifit here or not please clarify

Replies (2)

Quick Summary

This discussion clarifies Section 80CCD(2) of the Income Tax Act concerning NPS contributions for government employees. It confirms that both central and state government employees can claim tax benefits on employer contributions to NPS, even if these are not initially included in their gross salary on Form 16. The deduction is capped at 14% of basic pay plus dearness allowance for central government employees and 10% for other employers. It's advised to check with the employer why the contribution wasn't reflected in the gross salary but assures that the deduction can still be claimed directly in the tax return.

Fatema S. Mansawala

Chartered Accountant

30 Points Posted on 23 February 2021

- 80CCD(2) is applicable to government employee.(Both Central and state government)

- It can be considered while filing the income tax return, if not considered by employer in form 16.

- The contribution should be 10% of basic pay plus dearness allowance or equal to employers contribution but not more.

Josh

Manager

104 Points Posted on 07 March 2021

Section 80CCD (2) pertains to contribution made by employer (Central Government or any other employer) in notified pension scheme. Deduction allowed under this section is restricted to maximum.

a. 14%, of salary (Basic +DA) where such contribution is made by the Central Government;

b. 10% of salary (Basic +DA) where such contribution is made by any other employer,

So the deduction of 14% is applicable only to Central Government employees currently. Pls. check with concerned department why the contribution by employer is not reflected in gross salary. Generally, this should be reflected as a part of gross salary. However you can claim 80CCD(2) deduction up to the limits mentioned above in returns.