Deduction under section 80CCD for self-employed individual w.e.f AY 2018-19

By | February 22, 2018
(Last Updated On: February 22, 2018)

CBDT CIRCULAR NO.2/2018 [F.NO.370142/15/2017-TPL]DATED 15-2-2018

37. Rationalisation of deduction under section 80CCD for self-employed individual.

37.1 The provisions of section 80CCD of the Income-tax Act provide that employees or other individuals shall be allowed a deduction for amount deposited in National Pension System trusts (NPS). The deduction under section 80CCD(1) of the Income-tax Act could not exceed 10% of salary in case of an employee or 10% of gross total income in case of other individuals. However, under the provisions of section 80CCD(2) of the Income-tax Act, further deduction to an employee in respect of contribution made by his employer was allowed up to 10% of salary of the employee. Thus, in case of an employee, the deduction allowed under section 80CCD of the Income-tax Act added up to 20% of salary whereas in case of other individuals, the total deduction under section 80CCD was limited to 10% of gross total income.

37.2 In order to provide parity between an individual who is an employee and an individual who is self-employed, section 80CCD of the Income-tax Act has been amended so as to increase the upper limit of 10% of gross total income to 20% in case of individual other than employee.

37.3 Applicability: This amendment takes effect from 1st April, 2018 and, will accordingly; apply from assessment year 2018-19 and subsequent years.

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