When it comes to tax-saving investment avenues, Section 80C tops the charts. It is a favourite among every investor as it allows a range of investment options and expenses to be eligible for deduction from your taxable income. Some of the popular options for claiming deduction under Section 80C include the following –
The maximum deduction which can be claimed under Section 80C, combining all the eligible options is INR 1.5 lakhs. What if you want to save additional tax?
If you are looking for additional tax saving, Section 80CCD of the Income Tax Act comes into the picture. This section lets you reduce up to INR 50,000 of your taxable income over and above the tax-free limit that you get under Section 80C. Thus, if you choose to invest in the avenue under Section 80CCD, you can claim a total deduction of INR 2 lakhs, INR 1.5 lakhs through Section 80C and INR 50,000 through Section 80CCD. Let’s understand how –
Section 80CCD allows deductions from your taxable income if you invest in the National Pension Scheme or the Atal Pension Yojana scheme. Whether the investment is made by you or your employer, deduction on the investment done can be claimed under this section.
Both the National Pension Scheme and Atal Pension Yojana are retirement oriented investment schemes launched by the Government of India. Both the schemes provide pension income after maturity.
Here are some of the features of National Pension Scheme –
Here are the salient features of Atal Pension Yojana for you to know –
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 –
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.
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.
Yes, you can surrender your NPS account provided some conditions are fulfilled.
No, the benefits are not tax-free. Both these scheme allow pension income which is taxable in the hands of the annuitant as income from salary.
The accumulated corpus of the National Pension Scheme can be reinvested in any pension plan. Such a reinvestment would not attract any tax. Only the pension payments which would be later paid would be taxable.
You can claim a maximum deduction of INR 2 lakhs after availing the benefits allowed under section 80CCD of the income tax act.
A proof of joining the scheme and making the contributions would be required to avail deductions under Section 80CCD.
Ans: No. Assesse can claim benefit of Insurance Premium
Ans: No, assessee can not claim tax exemption for the same.
Ans: Only assesses parents are considered for the tax benefits.
Ans: Yes. An assessee can claim deduction u/s 80C with respect to insurance premium but it does not include premium paid for the Parents of the assessee.
Ans: Yes. Only one individual can claim a deduction of LIC policy (i.e either father or son).
Ans: Yes, an individual can claim tax benefit under Section 80C.
Ans: Yes, assessee can take multiple LIC policy for the purpose of deduction u/s 80C.
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