Pension Schemes under section 80CCC and 80CCD – Individual Taxation

Section 80CCC and 80CCD of the Income Tax Act, 1961, drives the provisions of pension schemes in India. We have tried to put a summarised note on these two provisions. Provisions of section 80CCC – It provides a deduction to an individual for any amount paid or deposited by the tax payers in any annuity plan of the LIC of India or any other insurer for receiving pension from a fund referred in section 10(23AAB). The deduction under this section shall be restricted to overall limit of Rs. 100,000 under section 80C of the Act. Key points under this provision – • Where after claiming deduction, the assessee of his/ her nominee surrenders the annuity before the maturity date of such annuity, the surrender value shall be taxable in the hands of the assessee or his/her nominee, as the case may be, in the year of the receipt; • The maximum amount deductible under section 80CCC is Rs. 100,000. Moreover, the aggregate amount of deduction under section 80C, 80CCC and 80CCD, shall be restricted to Rs. 100,000. Provisions of section 80CCD -  It states that, if an individual is under employment or self-employed, has in previous year paid or deposited any amount in his account under a pension scheme notified by the central government, then can claim benefit of this section. Key points under this provision – • Tax payer’s contribution to the notified pension is deductible under section 80CCD(1) in the year in which contribution is made. No deduction is available in respect of employee’s contribution which is in excess of 10 percent of the salary ( includes dearness allowances, but excludes all other allowances and perquisites) of the employee. Likewise, if contribution by a taxpayer (not being an employee) exceeds 10 percent of his gross total income, the excess shall not be taken into consideration for the purpose of section 80CCD. • Contribution by the employer to the notified pension scheme is deductible under section 80CCD(2) in the hands of the concerned employee in the year in which contribution is made. However, no deduction is available in respect of employer’s contribution which is in excess of 10 percent of the salary of the employee. • The amount standing to the credit of the assessee in the pension account, for which a deduction has already been claimed by him, and accretions to such account, shall be taxed as income in the year in which such amounts are received by the assessee (or his nominee) on closure of the account or his opting out of the said scheme or on receipt of pension from annuity plan in the same previous year, then it will be exempt from tax. • The aggregate amount of deduction under section 80C, 80CCD and 80CCD(1) ( that is contributed by employees) towards the notified pension scheme cannot exceed Rs. 1lac in total. • Further, under section 80C, 80CCC and 80CCD(1), (contribution by an employee, or any other individual towards notified pension scheme) cannot exceed Rs. 100,000 (from the AY 2012-13) Further, section 80CCE, which talks about the restriction of Rs. 1 lac for the combined contribution of employee and employers for pension scheme (80C, 80CCC and 80CCD) has been amended with effect from FY 2011-12 (AY 2012-13), wherein to provide that contribution made by the employer to NPS under section 80CCD (2) shall be excluded from the limit of Rs. 1 Lacs provided under section 80CCE. provides complete online taxation solutions for individuals ( Tax Returns + Tax Support + Tax Planning ) – please see this – Services Offered.– Providing Complete Online Tax Solutions for Individuals, Not Just Returns.

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