Income Tax :- Deduction in resepect of Contribution to Pension Scheme of Central Government

Deduction in respect of contribution to pension scheme of Central Government (Section 80CCD): for Financial Year 2013-14 or Assessment Year 2014-15

Section 80CCD(1) allows an employee, being an individual employed by the Central Government or any other employer, on or after the 01.01.2004, a deduction of an amount paid or deposited out of his income chargeable to tax under a pension scheme as notified vide Notification F. N. 5/7/2003- ECB&PR dated 22.12.2003 or as may be notifed by the Central Government. However, the deduction shall not exceed an amount equal to 10% of his salary(includes Dearness Allowance but excludes all other allowance and perquisites).

As per Section 80CCD(2), where 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. 

However, 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 01.04.09 that 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.

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

Claim of Deduction for Infrastructure Bond (80CCF) in NSDL Software

Friends,  There are two columns (Serial No 337 and 338)  in NSDL RPU software for entering of Deduction of Chapter VIA which are detailed given below :-

• Column Number 337 denotes  that  "Aggregate Amount of Deductions Under Sections 80C, 80CCC and 80CCD (Total to be limited to amount specified in section 80CCE)"
• Column Number 338 denotes that  "Amount Deductible Under any other Provision(s) of  Chapter VI-A.

Picture view for the same is also given as under :-

On reading above it is very much clear that deduction amount under section 80CCF can not be entered in column number 337.  It will be shown in column Number 338. Before taking any final solution, some detailed deductions relating to this topic is given as under :-

80C as per Income Tax Act  (Click Here to know more)

80CCC as per Income Tax Act

⁵[Deduction in respect of contribution to certain pension funds.

80CCC. (1) Where an assessee being an individual has in the previous year paid or deposited any amount out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India ⁶[or any other insurer] for receiving pension from the fund referred to in clause (23AAB) of section 10, he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income, of the whole of the amount paid or deposited (excluding interest or bonus accrued or credited to the assessee’s account, if any) as does not exceed the amount of ⁷[one lakh] rupees in the previous year.

(2) Where any amount standing to the credit of the assessee in a fund, referred to in sub-section (1) in respect of which a deduction has been allowed under sub-section (1), together with the interest or bonus accrued or credited to the assessee’s account, if any, is received by the assessee or his nominee—

          (a)  on account of the surrender of the annuity plan whether in whole or in part, in any previous year, or

          (b)  as pension received from the annuity plan,

an amount equal to the whole of the amount referred to in clause (a) or clause (b) shall be deemed to be the income of the assessee or his nominee, as the case may be, in that previous year in which such withdrawal is made or, as the case may be, pension is received, and shall accordingly be chargeable to tax as income of that previous year.

⁸[(3) Where any amount paid or deposited by the assessee has been taken into account for the purposes of this section,—

          (a)  a rebate with reference to such amount shall not be allowed under section 88 for any assessment year ending before the 1st day of April, 2006;

          (b)  a deduction with reference to such amount shall not be allowed under section 80C for any assessment year beginning on or after the 1st day of April, 2006.]]

80CCD as per Income Tax Act

⁹[Deduction in respect of contribution to pension scheme of Central Govern-ment.¹⁰

80CCD. (1) Where an assessee, being an individual employed by the Central Government ¹¹[or any other employer] on or after the 1st day of January, 2004, ¹²[or any other assessee, being an individual] has in the previous year paid or deposited any amount in his account under a pension scheme notified or as may be notified by the Central Government, he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income, of the whole of the amount so paid or deposited ¹³[as does not exceed,—

          (a)  in the case of an employee, ten per cent of his salary in the previous year; and

          (b)  in any other case, ten per cent of his gross total income in the previous year.]

(2) Where, in the case of an assessee referred to in sub-section (1), the Central Government ¹⁴[or any other employer] makes any contribution to his account referred to in that sub-section, the assessee shall be allowed a deduction in the computation of his total income, of the whole of the amount contributed by the Central Government ¹⁴[or any other employer] as does not exceed ten per cent of his salary in the previous year.

(3) Where any amount standing to the credit of the assessee in his account referred to in sub-section (1), in respect of which a deduction has been allowed under that sub-section or sub-section (2), together with the amount accrued thereon, if any, is received by the assessee or his nominee, in whole or in part, in any previous year,—

          (a)  on account of closure or his opting out of the pension scheme referred to in sub-section (1); or

          (b)  as pension received from the annuity plan purchased or taken on such closure or opting out,

the whole of the amount referred to in clause (a) or clause (b) shall be deemed to be the income of the assessee or his nominee, as the case may be, in the previous year in which such amount is received, and shall accordingly be charged to tax as income of that previous year.

¹⁵[(4) Where any amount paid or deposited by the assessee has been allowed as a deduction under sub-section (1),—

          (a)  no rebate with reference to such amount shall be allowed under section 88 for any assessment year ending before the 1st day of April, 2006;

          (b)  no deduction with reference to such amount shall be allowed under section 80C for any assessment year beginning on or after the 1st day of April, 2006.]

¹⁶[(5) For the purposes of this section, the assessee shall be deemed not to have received any amount in the previous year if such amount is used for purchasing an annuity plan in the same previous year.]

Explanation.—For the purposes of this section, “salary” includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.]

80CCE as per Income Tax Act

¹⁷[Limit on deductions under sections 80C, 80CCC and 80CCD.

80CCE. The aggregate amount of deductions under section 80C, section 80CCC and ^17a[section 80CCD] shall not, in any case, exceed one lakh rupees.]

80CCF as per Income Tax Act

¹⁸[Deduction in respect of subscription to long-term infrastructure bonds.

80CCF. In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted, the whole of the amount, to the extent such amount does not exceed twenty thousand rupees, paid or deposited, during the previous year relevant to the assessment year beginning on the 1st day of April, 2011 ^18a[or to the assessment year beginning on the 1st day of April, 2012], as subscription to long-term infrastructure bonds as may, for the purposes of this section, be notified^18b by the Central Government.]