27/08/2013

Section 80CCD

Summary Income Tax Deduction u/s 80CCD, Income Tax 80CCD
Section 80CCD
Deduction in respect of contribution to pension scheme of Central Government

*      An individual assessee employed by the Central Government or any other employer on or after 01.01.2004.
*      Any other assessee individual has paid or deposited any amount in a notified pension scheme.
*      He shall be allowed a deduction of such amount paid as does not exceed-
ü      In the case of an employee, 10% of his salary in the previous year end
ü      In any other case, 10% of his gross total income in the previous year.
*      In case of Central Government or any other employer makes a contribution to employees account as does not exceeding 10% of the salary and subject to section 80CCE for further deduction of such an amount.
*      If assessee nominee, receives and amount from said Pension Scheme and deduction than the whole of such amount shall be deemed to be the income of the assessee or his nominee in the year of receipt.
*      Any amount paid or deposited by the assessee has been allowed as a deduction under said section would not be considered for further benefit u/s 80C.
*      If amount used for purchasing an annuity plan in the same previous year then the assessee shall be deemed not to have received any amount.


Example:
Salary = 20000  DA = 10000 Other Taxable Allowances = 10000
Total Monthly = 40000 (Yearly 480000)
Employer contribution to NPS (CPF)=10% of 3000=3000=Yearly=36000/-
Employer contribution to NPS (CPF)=10% of 3000=3000=Yearly=36000/-
Employee invested 3000 in insurance policy eligible u/s 80C
PPF = 44000

Computation of Income
Income from Salary                                      = 480000/-
Add: Employer’s contribution to CPF/NPS     = 36000/-
Gross Taxable Salary/Income                       = 516000/-

Less: Deduction u/s 80C
LIC              = 30000/-
PPF              = 44000/-
Employees Share CPF      =       36000 (80CCD)
Total                              =       110000/-
(Maximum Allowable)      =       100000/-
Less: Employer contribution to CPF
Deduction u/s 80CCD(2)          =       36000/-

Total Deduction               =       136000/-

Net Taxable income is     = 516000-136000=380000/-  

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