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Section 80CCD(2) of Income Tax Act

Employer’s can also claim for additional deduction for contributing towards employee’s pension account of up to 10% of the salary of the employee. There is no specific ceiling on this deduction.

Provisions under this section come into effect when an employer contributes towards the employee’s NPS. The contributions towards NPS will be apart from the contributions made towards EPF and PPF. The contribution amount made by the employer can be equal to or higher than the contribution made by the employee. This section is applicable only to the salaried employees and is not meant for self – employed individuals. 

Terms and Conditions for deductions under Section 80CCD

The following are the list of terms and conditions governing deductions under Section 80CCD:

  • The maximum limit of deduction available under this section is Rs 2 lakhs and this includes an additional deduction of Rs 50,000 which is available under sub section 80CCD(1B).
  • Tax benefits availed under this section cannot be claimed under Section 80C (the combined deduction under Section 80C and Section 80CCD should not exceed Rs 2 lakhs per annum).
  • Deductions under Section 80CCD are available to both salaried as well as self – employed individuals. As it is mandatory for the government employees and it is voluntarily for others.
  • Money received from National Pension Scheme (NPS) as monthly payments or as surrendered accounts will be liable for taxation purposes.
  • If the amount received from NPS which is again reinvested in the annuity plan then the entire amount is exempt from taxation. 
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