Amended and updated notes on section 80CCD of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to deduction in respect of contribution to pension scheme of Central Government.
Chapter VIA (Sections 80A to 80U) of the Income Tax Act 1961 deals with the provisions related to deductions to be made in computing total income. Section 80CCD of IT Act 1961-2022 provides for deduction in respect of contribution to pension scheme of Central Government.
Recently, we have discussed in detail section 80CCC (deduction in respect of contribution to certain pension funds) of IT Act 1961.
Today, we learn the provisions of section 80CCD of Income-tax Act 1961 as amended by the Finance Act 2022. The amended provision of section 80CCD is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 80CCD of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962, regulations, notifications, circulars, orders and Press Release by CBDT, Income Tax Department and the Ministry of Law and Justice, Government of India.
Section 80CCD: Deduction in respect of contribution to pension scheme of Central Government
Section 80CCD (1):
Where an assessee, being an individual employed by the Central Government on or after the 1st day of January, 2004 or, being an individual employed by any other employer, 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 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, twenty per cent of his gross total income in the previous year.
Section 80CCD(1A): [Omitted]
Section 80CCD (1B):
An assessee referred to in sub-section (1), shall be allowed a deduction in computation of his total income, whether or not any deductions is allowed under sub-section (1), of the whole of the amount paid or deposited in the previous year in his account under a pension scheme notified or as may be notified by the Central Government, which shall not exceed fifty thousand rupees:
Provided that no deduction under this sub-section shall be allowed in respect of the amount on which a deduction has been claimed and allowed under sub-section (1).
Section 80CCD (2):
Where, in the case of an assessee referred to in sub-section (1), the Central Government or the State Government 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 or the State Government any other employer as does not exceed—
- (a) fourteen per cent, where such contribution is made by the Central Government or the State Government;
- (b) ten per cent, where such contribution is made by any other employer,
of his salary in the previous year.
[Sub-section (2) of section 80CCD amended (substituted) and shall be deemed to have been substituted with effect from the 1st day of April, 2020 by the Finance Act 2022.]
Section 80CCD (3):
Where any amount standing to the credit of the assessee in his account referred to in sub-section (1) or sub-section (1B), in respect of which a deduction has been allowed under those sub-sections 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 sub-section (1B); 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:
Provided that the amount received by the nominee, on the death of the assessee, under the circumstances referred to in clause (a), shall not be deemed to be the income of the nominee.
Section 80CCD (4):
Where any amount paid or deposited by the assessee has been allowed as a deduction under sub-section (1) or sub-section (1B),—
- (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.
Section 80CCD (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.