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Section 80CCD Deduction

Section 80CCD deduction is available for contributions made by the taxpayer to a pension fund. The maximum deduction allowed under Section 80C, Section 80CCC and Section 80CCD is Rs.1.5 lakhs.

Income Tax Deduction for Contribution to Pension Fund

Section 80CCD deduction can be availed by taxpayers who have made contributions to a pension fund like National Pension Scheme or Atal Pension Yojana. In case of employment, upto 10% of the salary in the previous year can be claimed as a deduction. For all other cases, 10% of the gross total income in the previous year is allowed as deduction. In addition to claiming deduction under Section 80CCD, taxpayers can also claim a deduction of upto Rs.50,000 for contribution to National Pension Scheme. The deduction for contribution to National Pension Scheme is admissible over and above the ceiling of deduction of Rs.1.5 lakhs under section 80C, 80CCC and 80CCD.

National Pension Scheme
National Pension System is a Government approved pension scheme for Indian citizens in the 18-60 age group. National Pension Scheme is managed by the Pension Fund Regulatory and Development Authority (PFRDA). The minimum yearly contribution required for the National Pension Scheme is Rs 6,000, which either can be paid in one go or in installments of at least Rs 500.
Atal Pension Yojana
Atal Pension Yojana is administered by the Pension Fund Regulatory and Development Authority under the National Pension System (NPS). The scheme was launched to encourage individuals to create an income from pension, which would help them during their old age. Atal Pension Yojana can also be taken by individuals working in the private sector. Based on the amount of contribution to the pension fund, a person can receive a fixed monthly pension amount starting from Rs. 1000, Rs. 2000, Rs. 3000, Rs. 4000 and up to Rs. 5000, every month after their retirement at the age of 60, until the death of the subscriber.
Income Tax Deduction for Contribution to Pension Fund

Closing of Pension Account

If a taxpayer closes or opts out of the pension scheme, the whole amount received by the taxpayer would be deemed to be income of the taxpayer in the previous year and chargeable to income tax. However, if the assessee uses the whole amount received in the previous year for purchasing an annuity plan in the same previous year, then the amount received will not be treated as income. Also, of the amount standing to the credit of an assessee is received by a nominee, on death of the assessee, then the amount will not be deemed to be the income of the nominee.

Section 80CCD - Income Tax - Bare Act

After section 80CCC of the Income-tax Act, the following section shall be inserted, namely:

  • 80CCD. Deduction in respect of contribution to pension scheme of Central Government.—(1) Where an assessee, being an individual employed by the Central Government on or after the 1st day of January, 2004, 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, he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income, of the whole of the amount so paid or deposited as does not exceed ten per cent of his salary in the previous year.
  • Where, in the case of an assessee referred to in sub-section (1), the Central Government makes any contribution to his account referred to in that sub-section, the assessee shall be allowed a deduction in the computation of his total income, of the whole of the amount contributed by the Central Government as does not exceed ten per cent of his salary in the previous year.
  • Where any amount standing to the credit of the assessee in his account referred to in sub-section (1), in respect of which a deduction has been allowed under that sub-section or sub-section (2), together with the amount accrued thereon, if any, is re­ceived by the assessee or his nominee, in whole or in part, in any previous year,
    • on account of closure or his opting out of the pension scheme referred to in sub-section (1); or
    • as pension received from the annuity plan purchased or taken on such closure or opting out, the whole of the amount referred to in clause (a) or clause (b) shall be deemed to be the income of the assessee or his nominee, as the case may be, in the previous year in which such amount is received, and shall accordingly be charged to tax as income of that previous year.
  • Where any amount paid or deposited by the assessee has been allowed as a deduction under sub-section (1), no rebate with reference to such amount shall be allowed under section 88.
Explanation : For the purposes of this section, "salary" includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.

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