How to claim deductions under Section 80CCD
Now that you know which deductions are eligible for Section 80CCD and the features of these deductions, let’s understand how to claim such deductions. There are two sub-sections under Section 80CCD, Section 80CCD (1) and Section 80CCD (2). Let’s understand these sub-sections in details –
Section 80 CCD (1)
This sub-section is applicable to both self-employed as well as salaried individuals to claim deductions on the contributions made towards the National Pension Scheme or the Atal Pension Yojana. In case of an employee, the employee can be a Government employee or a private-sector employee. If the tax-payer is between the ages of 18 years and 60 years, contributions made towards both the schemes would be allowed as a deduction under Section 80CCD (1). If the tax-payer is a salaried employee, the maximum deduction allowed under this section would be limited to 10% of the salary which means basic salary and dearness allowance. In case of self-employed individuals, the maximum available deduction is 20% of the gross total income of the financial year earned by the tax-payer. In both the instances, the maximum limit is INR 1.5 lakhs which would include the options of Section 80C too. Moreover, an additional deduction of INR 50,000, over and above INR 1.5 lakhs can be claimed under Section 80CCD (1B). Thus, the total deduction available under Section 80CCD (1) including Section 80C would be INR 2 lakhs in a financial year.
Section 80 CCD (2)
This Section is applicable for salaried employees where their employer is also contributing to the National Pension Scheme. The employer can make contributions towards National Pension Scheme besides contribution to EPF. The limit of contribution allowed would be either equal to the contributions made by the employee or higher than that. This deduction is available over and above the deduction under Section 80 CCD (1).
So, understand the deduction available under Section 80CCD so that you can lower your tax liability further and also create a retirement corpus in the process.