Nowadays, individuals are getting too curious about the deduction they can claim u/s 80CCD through the contribution made in new pension scheme (or notified pension scheme or NPS). Here are the brief details of section 80CCD:

Qualifying Contribution

Amount contributed to pension scheme notified by Central Government is dealt in this section.

Assessee covered

• Individual employed by the Central Government or any other employer on or after January 1, 2004.
• Even a self-employed person can claim the benefit of this deduction. So, both the salaried and non-salaried individuals are covered in this section.

Moreover, the assessee mentioned above should paid or deposited in previous year any amount in his account under a pension scheme notified by the central government, then can claim benefit of this section. Deduction – Employee’s Contribution Deduction for employee’s contribution is available subject to a maximum of 10% of salary. In case of self employed individual, the contribution limit is restricted to 10% of gross total income. Also the deduction shall be allowed within the aggregate ceiling limit of Rs.100000 taking into account deductions u/s 80C, 80CCC and 80CCD. Deduction – Employer Contribution Deduction for employers’ contribution is also subject to the said limit of 10% of salary. But, here the most important point to note that with effective from assessment year 2012-13 (financial year 2011-12) employer’s contribution shall not be counted for computing the overall limit of Rs.100000. In other words, the ceiling of Rs. 100000 shall not apply to employer’s contribution to said NPS provided the contribution is limited to 10% Taxability at closure or opting out of the scheme Any amount received from such pension scheme by the individual or his nominee either on closure or his opting out of the scheme or as a pensioner shall be deemed as income of the recipient for the year in which it is received. Taxability of receipts/withdrawals out of deposits of NPS The receipts/withdrawals out of deposits of NPS will not be taxable where they are used for purchasing an annuity plan within the same financial year. This amendment has been made with effective from assessment year 2009-10 (financial year 2008-09). Taxmantra.com provides full fledged comprehensive tax planning service wherein we suggest the best investment and tax saving plans, which would minimize your total tax on income.