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Tax benefit under NPS

Dip Narayan (Deputy Manager) (772 Points)

25 April 2023

Does any individual can get the benefit u/s 80CCD(2) and 80CCD(1B) by investing at NPS.

It is assumed that the individual is under old tax regime

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (180260 Points)
Replied 25 April 2023

Yes, eligible.

Section 80CCD (2) applies to only salaried individuals and not to self-employed individuals. The deductions under this section can be availed over and above those of Section 80CCD (1). Section 80CCD (2) allows a salaried individual to claim the following deduction:

A maximum deduction of 14% of their salary (basic + DA) contributed by the Central Government or State Government towards NPS.
A maximum deduction of 10% of their salary (basic + DA) contributed by any other employer towards NPS.
The maximum deduction limit available under Section 80CCD is Rs 2 lakhs; this includes the additional deduction of Rs 50,000 available under 80CCD (1B).

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B Durga Prasad (Student) (175 Points)
Replied 25 April 2023

Yes, an individual can get the benefit of both Section 80CCD(2) and Section 80CCD(1B) by investing in the National Pension System (NPS), provided they are under the old tax regime.

Section 80CCD(2) allows an additional deduction of up to 10% of the individual's salary (for employees) or gross total income (for self-employed individuals) contributed by the employer towards the employee's NPS account. This deduction is over and above the limit of Rs. 1.5 lakh under Section 80C.

Section 80CCD(1B) allows an additional deduction of up to Rs. 50,000 per financial year for contributions made by an individual to their own NPS account. This deduction is also over and above the limit of Rs. 1.5 lakh under Section 80C.

Therefore, an individual can claim a maximum deduction of up to Rs. 2 lakh (Rs. 1.5 lakh under Section 80C, Rs. 50,000 under Section 80CCD(1B), and up to 10% of salary or gross total income under Section 80CCD(2)) by investing in NPS and availing the benefits under both these sections.

It is important to note that the total deduction claimed under Section 80C, Section 80CCD(1B), and Section 80CCD(2) cannot exceed the maximum limit of Rs. 2 lakh.

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