Section 80CCD is primarily related to the deductions that are available to individuals for the contributions made to the National Pension Scheme or the Atal Pension Yojana.
The entire Section 80 CCD deals with tax benefits provided on the basis of contributions made to the pension fund schemes notified by the central government.
There are various sub-sections to Section 80CCD of the Income Tax Act. Apart from the sections mentioned above, there are a few sections that deal with how the money is treated, the tax treatment of premature withdrawals, and other rules and regulations regarding money deposited in your pension fund account.
80 CCD deduction is not limited to part 1 for the employees. There is an additional benefit available under section 80CCD(1B).
These income tax deductions sections are for investments made in a pension scheme notified by the central government. 80CCD (1) deals with the investment or contribution made by an employer to such a pension scheme, whereas section 80CCD (2) deals with employer contribution to an employee's pension account.
National Pension Scheme (NPS) is the scheme notified by the central government. The section 80CCD deals with tax deductions and reliefs given for contributions made to the pension fund account.
Following is the detailed overview of Section 80CCD (1) and 80CCD(2).
Section 80CCD1 allows every tax-paying individual in India to get tax deduction benefits from the amount you deposit in your NPS account. This tax benefit is open to both: employed and self-employed.
This section applies to all such individuals and is even open to NRIs aged between 18 to 60.
Your total 80CCD exemption limit reduces your total tax liability to the government.
However, there is a limit to how much you can claim under section 80 CCD (1), like all other income tax deductions given by the government.
Section 80CCD 2 refers to a tax benefit for employers with respect to a contribution made to the pension scheme. If your employer contributes to your NPS account, your employer gets a tax benefit under section 80CCD 2. This tax benefit is limited to 20% of the total income of the employer in the previous year.
Sections 80CCD1 and (2) fall under the larger section 80CCD of the Income Tax Act, 1961. These sections were introduced in 2004 after the National pension Scheme (NPS) was introduced for the first time in the country.
National Pension Scheme under 80CCD
Atal Pension Yojana (APY) under 80CCD
Here are some of the key terms and conditions that are to be adhered to for claiming national pension scheme 80CCD-
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