Deduction under Section 80CCD for National Pension Scheme (NPS) Contribution is one of the most popular deduction under Income Tax.
1. Section 80CCD(1) –
Contribution made by Salaried Employees or Self Employed person
This provision is applicable to all the employees i.e Government as well as Non- Government and to those people who are self- employed. In this section there is no specification for resident that means this is applicable for the Non Resident Individuals as well.
The deduction u/s 80CCD(1) quantified as follows:
i) For Employees – 10% of his salary in the previous year
ii) For Self Employed Person – 20% of his gross total income in the previous year
2. Section 80CCD(1B) –
Additional deduction over and above Section 80CCD(1)
This sub section is introduced by Finance Act, 2015. As per this sub-section the assessee i.e Salaried employee or Self-Employed person both can claim additional Rs 50,000/- as deduction which is over and above Rs. 150000 as available u/s 80C, 80CCC and 80CCD(1). This is also for the contribution made towards notified pension scheme.
3. Section 80CCD(2)
Contribution made by Employer or Central Government
This section comes into play when the Central Government or any other employer makes any contribution to the account of an assessee referred in Section 80CCD(1). Now, how this deduction will work in Income Tax Return is little different as compared to other deductions.
Impact of Finance Act, 2020 on Section 80CCD:
Now, heading towards the most crucial factor. As per Finance Act, 2020, Government introduced New Tax regime for Individuals i.e u/s 115BAC which have some concessional rate of taxation. But for taking the benefits of these concessional rates, the assessee has to forego the most of the deductions and exemptions available under the current regime.
Coming directly toward our concern point of today's topic, if person opt for New Tax Regime he has to forgone the deductions u/c VI-A like 80C, 80D, 80E, 80G except 80CCD(2) and 80JJAA. This means they can claim deduction u/s 80CCD(2) irrespective of the fact that whether they are choosing old tax regime or new tax regime. Hence, this thing we all need to keep in mind at the time of filing of Income Tax return henceforth.