Section 80CCD-Deduction New Pension Scheme

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Section 80CCD allows an employee, being an individual
employed by the Central Government or any other employer, on or after the
1-1-2004, a deduction of an amount paid or deposited out of his income chargeable to tax
under a pension scheme as notified or as may be notified by
the Central Government, vide Notification F. N. 5/7/2003-
ECB&PR, dated 22-12-2003.



However, the deduction shall not exceed an amount equal to 10% of his
salary (includes Dearness Allowance but excludes all other allowance and
perquisites).
Further where in the case of an employee receives any contribution in
the said pension scheme from the Central Government or any other employer
then the employee shall be allowed a deduction from his total income
of the whole amount contributed by the Central Government or any other
employer subject to limit of 10% of his salary of the previous year.
Taxation at the Time of out of pension scheme and treatment of Annuity: if any amount is standing to the credit of the
employee in the pension scheme referred above and deduction has been
allowed as stated above and the employee or his nominee receives this amount
together with the amount accrued thereon, due to the reason of 
(i) Closure or opting out of the pension scheme or
(ii) Pension received from the annuity plan purchased and
taken on such closure or opting out
then the amount so received during the FYs shall be the
income of the employee or his nominee for that Financial Year and
accordingly will be charged to tax.
Where any amount paid or deposited by the employee has been
taken into account for the purposes of this section, a deduction with
reference to such amount shall not be allowed under section 80C.
Further it has been specified that w.e.f 1-4-2009 any amount
received by the employee from the new pension scheme shall be deemed not
to have received in the previous year if such amount is used for purchasing
an annuity plan in the previous year.
Employee Contribution :It
is emphasized that as per the section 80CCE the aggregate amount of deduction
under sections 80C, 80CCC and Section 80CCD(1) shall not exceed Rs.
1,00,000/-

Employer’s contribution : However the contribution
made by the Central Government or any other employee to a pension scheme
u/s 80CCD(2) shall be excluded from the limit of Rs.1,00,000/- provided
under this Section.

Contribution by Govt /Employer to New Pension scheme /Contributed
Pension scheme is taxable in the hand of Employee as perquisites
 :. Any contribution made by the Central Government or
any other employer to the account of the employee under the New Pension
Scheme as notified vide Notification F.N. 5/7/2003- ECB&PR, dated 22-
12-2003 referred to in section 80CCD above shall also be  included in
the salary income.
Example : 
Salary
=20000    DA=10000  Other taxable allowance =10000
Total Monthly
=40000 Yearly 480000
Employer’s
contribution to NPS (CPF)=10% of 30000=3000= Yearly=Rs 36000/-
Employee contribution to NPS (CPF) =10% of 30000=3000=Yearly =
Rs 36000/-
Employee invested
30000 in Insurance Policy eligible u/s 80C
PPF =44000
Computation of
Income
Add : employer’s
contribution to CPF/NPS 
                            =
  36000/-
Gross Total
taxable salary (income)    (A)                                         = 516000/-
Less : Deduction
u/s 80C         LIC          
                                          :
30000        
PPF=  
             : 44000  
employee’s share
CPF 
                                                                      :
36000 (80CCD)
Total  
                                                                                                 =
 :110000/-  
(but maxi one
lakh)                    
                                                        =100000/-
Less :Employer’s
contribution to CPF        
deduction u/s
80CCD(2)  
                 
                                                =36000/-
Total deduction
(B)                    
                                                        =136000/-
Net Taxable
Income (A) -(B)=516000-136000                                  =380000/-:

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