Understanding Section 80CCD: Tax Benefits for Pension Contributions

Retirement Savings Incentive: Section 80CCD offers tax deductions for contributions to the National Pension Scheme (NPS) and Atal Pension Yojana (APY), helping individuals build a retirement corpus while reducing taxable income. Eligibility: Individuals aged 18 to 60 years can claim these deductions. Note that the new tax regime doesn't permit this benefit.

Sec 80CCD(1): Deduction limit for salaried individuals is 10% of salary (Basic + DA) up to INR 1.5 lakh, and for self-employed, it's 20% of gross income up to INR 1.5 lakh. Sec 80CCD(2): Employers can contribute to NPS, with a deduction limit of 14% of salary for government employees and 10% for others. Self-employed individuals are not eligible under this section.

Sec 80CCD(1B): An additional deduction of INR 50,000 is available for NPS contributions, over and above the limits under Section 80C, 80CCC, and 80CCD(1). Example 1: Ajay, a salaried person, contributes INR 30,000 to NPS. He claims INR 30,000 under Sec 80CCD(1) and an additional INR 30,000 under Sec 80CCD(1B).

Example 2: Harshil, a government employee, contributes INR 40,000 to NPS, matched by his employer. He claims INR 40,000 under Sec 80CCD(1) and another INR 40,000 under Sec 80CCD(2). Documents Required: Submit receipts of NPS contributions and standard documents like Form 16 to claim the deductions.