Deduction for Contribution to NPS – Section 80CCD – Budget 2016

Income tax act provides various investment plans to save income tax act on the taxable income of assesses. Section 80C, Section 80CCC & Section 80CCD & 80D are the most popular among the assesses. This post mainly focused on the deduction under section 80CCD which major amendments during the last two budget proposals i.e in Budget 2015 & in Budget 2016.

Deduction under section 80CCD – Deduction for Contribution to NPS

Section 80CCD provides for the investment in the NPS of the central government. NPS stands for National Pension Scheme. This deduction is available only to individual assesses and not available to HUFs. This deduction is available to both salaried as well as non-salaried employees.

Extent of deduction under Section 80CCD

For Salaried Employees 10% of the salary earned during the Financial Year. Salary Includes Dearness allowance but excludes all other perquisites & allowances.
For Non Salaried Employees 10% of the GTI of the assesse. GTI means Gross Total Income

As per amendments of Budget 2015, Mr. Arun Jaitely has announced additional deduction of Rs. 50000/- under section 80CCD. This deduction amount is over and above the 150000/- limit of section 80CCD. So the total deduction under section 80C, 80CCC & 80CCD comes out as 1.5 Lacs + 0.5 Lacs = 2 lacs.

Deduction for Contribution to NPS – Section 80CCD – Budget 2016

Amendment in Budget 2016

Taxability on Investment amount received from NPS

The amount invested in the National Pension Scheme can be received back after retirement from the job or after surrender of the policy.

As per amendment in budget 2016, 40% of the withdrawal from the NPS amount is exempt from tax and balancing amount is taxable in the year of receipt.

If the assesse invest the withdrawal amount in annuity plan the same would not be taxable in the hands of the assesse.

That’s all for Deduction for Contribution to NPS  – Budget 2016.