Many salaried and non-salaried people invest in the National Pension Scheme or NPS to secure their life post retirement. To encourage more people to invest in NPS, an additional deduction worth Rs. 50,000 was announced, as per Section 80CCD(1B) or Section 80CCD (2) of Income Tax Act.
Just so you know, Section 80CCD 1(b) and Section 80CCD(2) are the same. Read on to know more about eligibility and deductions under Section 80CCD (1B).
Section 80CCD of ITA mainly facilitates deductions to individuals who contribute to the National Pension Scheme. Until 2015, as per the norms of the Income Tax Act, individuals could only avail of tax benefits of up to Rs. 1 lakh for the same. However, the Government made a few changes to this provision and announced that the maximum deduction would be Rs. 1.5 lakh from 2015 onwards.
The launch of Section 80CCD(1B) or 80CCD 2 of the Income Tax Act enabled individuals to claim an additional deduction of Rs. 50,000 for contributions they are making towards their NPS accounts.
This inevitably increased the maximum limit of deduction to Rs. 2 lakh u/s 80CCD of ITA.
If you are planning on investing in the National Pension Scheme, refer to the following section to know about certain intricacies of this provision.
Eligibility criteria for tax deductions under Section 80CCD (2) is given below:
The following points detail the deductions and limits mentioned under Section 80CCD of the Income Tax Act:
The Government of India initiated the National Pension Scheme (NPS) to inculcate the habit of systematic saving for the future. Under this scheme, any working individual can deposit a certain amount from his or her salary during employment to this scheme. This periodically saved amount will help build an investment corpus for retirement.
The NPS account holder can withdraw a certain amount after retirement. They will receive the remaining amount as a pension.
Earlier, only Central Government employees had access to the National Pension Scheme. However, PFRDA (Pension Fund Regulatory and Development Authority) has made NPS accessible to the public. One can enroll in NPS voluntarily for a secured future.
One has to fulfill the following conditions to be eligible to invest in National Public Scheme:
Eligibility criteria for citizens
Eligibility criteria for corporates
Entities registered under the following regulations can also apply for NPS:
Accounts under National Pension Scheme are of two types:
This is a mandatory account you need to open to enrol for NPS. Tier 1 account serves solely to save for retirement. Hence, withdrawing from this account comes with various restrictions. You cannot withdraw from a Tier 1 account before the age of 60.
The minimum investment required to open a Tier 1 NPS account is Rs. 500. You can deposit Rs. 1000 per year to keep this account active.
Unlike Tier 1 accounts, Tier 2 NPS accounts are voluntary or optional. You can either open a Tier 2 account at the same time as opening a Tier 1 account or later. There are no strict rules for withdrawal from these accounts. Pensioners can contribute or withdraw amounts to and from a Tier 2 NPS account as per their convenience.
The minimum amount to open a Tier 2 account is Rs. 1000. In contrast to Tier 1 accounts, there is no compulsion to deposit a certain amount to keep a Tier 2 account active.
Make sure to keep these following pointers in mind in case you are claiming deductions under Section 80CCD(1B):
Also Read – How To Pay Income Tax Online?
Additionally, remember that for individuals making partial withdrawals from their NPS accounts, 25% of their contribution will remain tax-free.
To claim tax benefits, you must carry the following documents:
Below are some points to keep in mind to claim deductions under Section 80CCD(1B):
Because of the deductions available under Section 80CCD(1B) of the Income Tax Act, the tax liability reduces significantly. This way, you can save a significant amount on taxes as well as create a considerable corpus for your retirement.
Ans: Yes, you can avail of tax benefits under both these subsections of 80CCD of ITA. However, to claim Section 80CCD(2) benefits, you need to be an employer making a contribution towards the employee’s NPS.
Ans: Section 80CCD(1B) of ITA primarily deals with tax deductions on your investment towards NPS. Therefore, note that there is no provision to avail tax benefits under this subsection of Section 80CCD of the Income Tax Act.
Ans: Persons of Indian Origin (PIO), Overseas Citizens of India (OCIs), and HUFs or Hindu Undivided Families cannot claim benefits under Section 80CCD(1B). It is possible for only resident and non-resident Indians to avail this benefit.
Ans: To acquire benefits of Section 80CCD(1), an individual must belong to one of these three categories:
1. Private employees
2. Government employees
3. Self-employed individuals
Any of these individuals making a contribution towards the National Pension Scheme is eligible for deductions.
Ans: The Income Tax Act does not allow individuals to receive benefits under Section 80CCD(1B) if they opt for the new regime. However, people who are still assessing their taxes under the old regime can benefit from this provision.
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
|Section 112A||Section 50||Section 245|
|Section 80QQB||Section 32AD||Section 250|
|Section 35D||Section 143 (1a)||Section 115BAB|
|Section 143||Section 79||Section 140A|
|Section 17(2)||Section 3||Section 94A|
|Section 147||Section 80||Section 40A|
|Section 48||Section 115AD||Section 14A|
|Section 45||Section 285BA||Section 6|
|Section 36||Section 87A||Section 80GGA|
|Section 244A||Section 234E||Section 28|
|Section 197||Sectio 548||Section 194J(1)(ba)|
|Section 145A||Section 80P||Section 92CD|
What is Form 26QB for TDS? How to Download and Submit it?While purchasing a property, buyers are liable to pay various taxes. The Finance Act, 2013 made TDS... Read More »
PF Withdrawal Rules 2023 – Rules, Documents Required and TypesEPF/PF Withdrawal Employees’ Provident Fund (abbreviated as EPF) is a popular retirement sav... Read More »
Stamp Duty and Property Registration Charges in Delhi 2023It is compulsory for property buyers in the Capital to pay stamp duty in Delhi during property regi... Read More »
Income Tax Return – Documents, Forms and How to File ITR Online AY 2023-24In India, it is mandatory for all taxpayers who earn more than the basic tax exemption limit to fil... Read More »
What is Section 80CCD – Deductions for National Pension Scheme and Atal Pension YojanaThe Income Tax Act provides a number of deductions and tax benefits to taxpayers, so they can strat... Read More »
Tax on Dividend Income: Sources, Tax Rate and TDS on dividend incomeWhat are Dividends? Companies may raise funds for running their operations by selling equity. Th... Read More »
Section 112A of Income Tax Act: Taxation on Long-Term Capital GainsWhat is Section 112A? Section 112A of the Income Tax Act was announced in Budget 2018 to replace... Read More »
Section 206AB of Income Tax Act: Eligibility And TDS RateSection 206AB was introduced in the Finance Bill 2021 as a new provision pertaining to higher deduc... Read More »
What is a Credit Note in GST – Example, Format and StepsA GST Credit Note is mandatory for any GST-registered supplier of goods or services. As a supplier,... Read More »
Exemptions and Deductions Under Section 10 of Income Tax ActWhat Is Section 10 of the Income Tax Act? Section 10 of the Income Tax Act, 1961 provides tax-sa... Read More »
Section 57 of the Income-tax Act – Income from Other SourcesIt is quite likely that many entities - individuals as well as businesses - have multiple sources o... Read More »