Deduction for National Pension System
[Section 80CCD – Applicable from Financial Year 2017-18 ( Assessment Year 2018-19) ]
Rationalisation of deduction under section 80CCD for self-employed individual
The existing provisions of section 80CCD of Income tax act provides that employee or other individuals shall be allowed a deduction for amount deposited in National Pension System trusts (NPS). The deduction under section 80CCD (1) cannot 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 Act, further deduction to an employee in respect of contribution made by his employer is allowed up to 10% of salary of the employee. Thus, in case of an employee, the deduction allowed under section 80CCD adds up to 20% of salary whereas in case of other individuals, the total deduction under section 80CCD is limited to 10% of gross total income.
In order to provide parity between an individual who is an employee and an individual who is self-employed, Finance Bill 2017 proposed to amend section 80CCD so as to increase the upper limit of ten per cent of gross total income to twenty per cent in case of individual other than employee.
This amendment will take effect from 1st April, 2018 and, will accordingly, apply in relation to assessment year
2018-19 and subsequent years.
[Clause 33]
Relevant Clause 33 of Finance Bill 2017
Amendment of section 80CCD.
33. In section 80CCD of the Income-tax Act, in sub-section (1), in clause (b), for the words “ten per cent.”, the words “twenty per cent.” shall be substituted with effect from the 1st day of April, 2018.
Explanation on Clause 33 of Finance Bill 2017
Clause 33 of the Bill seeks to amend section 80CCD of the Income-tax Act relating to deduction in respect of contribution to pension scheme of the Central Government.
Sub-section (1) of the said section inter alia, provides that in the case of 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 who 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 be allowed a deduction of an amount not exceeding ten per cent. of his salary in the previous year. In case of any other assessee, the deduction is limited to ten per cent. of gross total income in the previous year.
It is proposed to amend sub-section (1) so as to increase the upper limit of gross total income from ten per cent. to twenty per cent. in case of an individual other than employee.
This amendment will take effect, from 1st April, 2018 and will, accordingly, apply in relation to the assessment year
2018-2019 and subsequent years.
Books on Budget 2017-18
Taxmann’s Budget 2017-18 -Book
Budget 2017-18- Notifications on Central Excise , Customs and Service tax – New Book
Ajit Prakashan’s Union Budget 2017-18 -New Book
BDP’s Customs Law Manual (2017-18 Budget Editon with CD) -New Book
Related Post on Budget 2017-18
Budget Speech 2017-18 -Download /Print
Finance Bill 2017 -Download /Print -Budget 2017-18