Revenue Tax Act gives for varied deductions beneath Chapter VI-A for Contribution to Pension Plans. These Deductions can be found beneath Part 80C, Part 80CCC & Part 80CCD and could be claimed on the time of submitting of the earnings tax return. This text primarily focuses on Deductions allowed beneath Part 80CCD. For deductions beneath Part 80C & Part 80CCC, refer the next hyperlinks:-
- Part 80CCC: Deduction for Contribution for Pension Plan of Insurance coverage Firm
- Part 80C: Deduction for Contribution Pension Plan of UTI/Mutual Fund
Deduction beneath Part 80CCD
Part 80CCD gives for Revenue Tax deductions for contributions made to the notified Pension Scheme of the Central Govt i.e. for contribution to the Nationwide Pension Scheme (NPS). Deduction beneath this Part is just obtainable to People and to not HUF’s. The Particular person claiming deduction beneath this Part could also be Resident or Non-Resident.
Part 80CCD(1): Deduction to NPS Scheme for Contribution by the Particular person
Deduction beneath Part 80CCD(1) is just not solely obtainable to Salaried People however non-salaried people also can contribute to the NPS Scheme and avail deduction for a similar.
The utmost quantity allowed as a deduction beneath Part 80CCD(1) is:-
- In case of an staff: 10% of his wage for the monetary 12 months (Wage consists of Dearness Allowance however excludes all different Allowances and Perquisites)
- In case of non-employees: 10% of the Gross Whole Revenue within the Monetary 12 months (Elevated to twenty% from Monetary 12 months 2017 onwards)
Modification vide Finances 2015 in Part 80CCD
Earlier the deduction allowed for contribution to NPS was restricted to Rs. 1 Lakh [Sub Section 1A of Section 80CCD]. Nonetheless, with a view to encourage individuals to contribute in the direction of NPS, the utmost quantity allowed to be invested in Nationwide Pension Scheme has been elevated from Rs. 1 Lakhs to Rs. 1.5 Lakhs.
Furthermore, within the Finances 2015 introduced by Arun Jaitley – a brand new sub-section 1B has additionally been launched in order to supply for extra deduction in respect of any quantity paid, of upto Rs. 50,000 for contributions made by any Particular person assessees beneath NPS.
This extra advantage of Rs. 50,000 is over and above the advantage of Rs. 1.5 Lakhs allowed to be claimed as a deduction beneath Part 80C. Due to this fact, now the entire deduction that may be claimed beneath Part 80C + Part 80CCD = Rs. 2 Lakhs.
Part 80CCD(2): Deduction to NPS Scheme for Contribution by the Employer
In case any employer contributes to the NPS Scheme on behalf of the worker and the advantage of the identical can be availed by the worker, the worker would even be allowed a deduction beneath Part 80CCD(2) for the quantity of contribution made by the employer.
The contribution made by the worker himself to the NPS Scheme can be allowed as a deduction beneath part 80CCD(1) and the contribution made by the employer to the NPS Scheme can be allowed as a deduction beneath Part 80CCD(2).
The Deduction allowed beneath Part 80CCD(2) can be allowed for Employers Contribution as much as 10% of the Wage of the Particular person.
Tax on Quantity acquired again from the Nationwide Pension Scheme
The contribution made to the NPS Scheme can be acquired again by the worker as Pension after retirement or on give up of the coverage (because the case could also be).
On withdrawl from the NPS Account, 60% of the collected stability could be withdrawn and shall be exempt from Tax. An annuity can be bought from the stability 40% of the quantity.
Finances 2017 Replace: Exemption would even be allowed for partial Withdrawl not exceeding 25% of the Contribution made by the Worker in accordance with the phrases and circumstances specified beneath Pension fund Regulatory and Improvement Authority Act.