CPS Employees Save Extra Rs 50000 in Income Tax with 80 CCD

CPS Employees Save Extra Rs 50000 in Income Tax with 80 CCD

CPS Employees Save Extra Rs 50000 in Income Tax with 80 CCD Sec. 80CCD- Additional deduction for National Pension System contribution extra benefit of Rs. 50000/- on CPS and NPS employees teachers.  Budget 2015 has introduced a new section 80CCD (1B) which gives deduction up to Rs 50,000 for investment in NPS (National Pension Scheme) Tier 1 account from next financial year of FY 2015-16 CPS-PRAN-NPS-Additional-Income-Tax-2016-Deduction-on-saving-of-Rs-50000-150-lakhs ay 2016-17

Deduction under Section 80CCD

Section 80CCD provides for Income Tax deductions for contributions made to the notified Pension Scheme of the Central Govt i.e. for contribution to the National Pension Scheme (NPS). Deduction under this Section is only available to Individuals and not to HUF’s. The Individual claiming deduction under this Section may be Resident or Non-Resident.


Section 80CCD(1): Deduction to NPS Scheme for Contribution by the Individual
Deduction under Section 80CCD(1) is not only available to Salaried Individuals but non-salaried individuals can also contribute to the NPS Scheme and avail deduction for the same.
The maximum amount allowed as a deduction under Section 80CCD(1) is:-
  • In case of an employees: 10% of his salary for the financial year (Salary includes Dearness Allowance but excludes all other Allowances and Perquisites)
  • In case of non-employees: 10% of the Gross Total Income in the Financial Year
AMENDMENT VIDE BUDGET 2015 IN SECTION 80CCD
Earlier the deduction allowed for contribution to NPS was limited to Rs. 1 Lakh [Sub Section 1A of Section 80CCD]. However, with a view to encourage people to contribute towards NPS, the maximum amount allowed to be invested in National Pension Scheme has been increased from Rs. 1 Lakhs to Rs. 1.5 Lakhs.
Moreover, in the Budget 2015 announced by Arun Jaitley – a new sub-section 1B has also been introduced so as to provide for additional deduction in respect of any amount paid, of upto Rs. 50,000 for contributions made by any Individual assessees under NPS.
This additional benefit of Rs. 50,000 is over and above the benefit of Rs. 1.5 Lakhs allowed to be claimed as a deduction under Section 80C. Therefore, now the total deduction that can be claimed under Section 80C + Section 80CCD = Rs. 2 Lakhs.
CPS Employees Save Extra Rs 50000 in Income Tax with 80 CCD Sec. 80CCD- Additional deduction for National Pension System contribution extra benefit of Rs. 50000/- on CPS and NPS employees teachers.  Budget 2015 has introduced a new section 80CCD (1B) which gives deduction up to Rs 50,000 for investment in NPS (National Pension Scheme) Tier 1 account from next financial year of FY 2015-16 CPS-PRAN-NPS-Additional-Income-Tax-2016-Deduction-on-saving-of-Rs-50000-150-lakhs ay 2016-17
CPS Employees Save Extra Rs 50000 in Income Tax with 80 CCD

SECTION 80CCD(2): DEDUCTION TO NPS SCHEME FOR CONTRIBUTION BY THE EMPLOYER
In case any employer contributes to the NPS Scheme on behalf of the employee and the benefit of the same would be availed by the employee, the employee would also be allowed a deduction under Section 80CCD(2) for the amount of contribution made by the employer.
The contribution made by the employee himself to the NPS Scheme would be allowed as a deduction under section 80CCD(1) and the contribution made by the employer to the NPS Scheme would be allowed as a deduction under Section 80CCD(2).
The Deduction allowed under Section 80CCD(2) would be allowed for Employers Contribution up to 10% of the Salary of the Individual.
TAX ON AMOUNT RECEIVED BACK FROM THE NATIONAL PENSION SCHEME
The contribution made to the NPS Scheme would be received back by the employee as Pension after retirement or on surrender of the policy (as the case may be). The amount so received as Pension or on closure of the NPS Account either by the individual himself or by the nominee which has earlier been claimed as a deduction under Section 80CCD, would be regarded as Income in the hands of the recipient and would be taxed as per the Income Tax Slabs in the year of receipt.


NOTE ON RELEVANT CLAUSES  OF FINANCE BILL 2015
Clause 17 of the Bill seeks to amend section 80CCD of the Income-tax Act relating to deduction in respect of contribution to pension scheme of Central Government.
The existing provisions contained in sub-section (1) of section 80CCD, inter alia, provides that in the case of an individual, employed by the Central Government on or after 1st January, 2004, or being an individual employed by any other employer or any other assessee being an individual who has in the previous year paid or deposited any amount in his account under a pension scheme notified or as may be notified by the Central Government, a deduction of such amount not exceeding ten per cent. of his salary is allowed.
It is proposed to omit sub-section (1A) and insert a new sub-section (1B) so as to provide that an assessee referred to in sub¬section (1), shall, be allowed an additional deduction in computation of his total income, of the whole of the amount paid or deposited in the previous year in his account under a pension scheme notified or as may be notified by the Central Government, which shall not exceed fifty thousand rupees. It is also propose to provide that no deduction under this sub-section shall be allowed in respect of the amount on whcih deduction has been claimed and allowed under sub-section (1).
Consequential amendments have been proposed in sub-section (3) and sub-section (4) of section 80CCD.
These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years.
EXTRACT OF RELEVANT CLAUSES FROM FINANCE BILL 2015
17. Amendment of section 80CCD.
In section 80CCD of the Income-tax Act, with effect from the 1st day of April, 2016,-—
(a)      sub-section (1A) shall be omitted;
(b)      after sub-section (1A), as so omitted the following sub-section shall be inserted, namely:—
“(1B) An assesse referred to in sub-section (1), shall be allowed a deduction in computation of his total income, [in addition to the deduction allowed under sub-section (1)], of the whole of the amount paid or deposited in the previous year in his account under a pension scheme notified or as may be notified by the Central Government, which shall not exceed fifty thousand rupees:
Provided that no deduction under this sub-section shall be allowed in respect of the amount on which a deduction has been claimed and allowed under sub-section (1);
(c) in sub-section (3),—
(I)       for the words, brackets and figure, “sub-section (1)”, wherever they occur, the words, brackets, figures and letter “sub-section (1) or sub-section (1B)” shall be substituted;
(II)      for the words “under that sub-section”, the words “under those sub-sections” shall be substituted;
(d) in sub-section (4), for the words, brackets and figure, “sub-section (1)”, the words, brackets, figures and letter “sub-section (1) or sub-section (1B)” shall be substituted.

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