F.No. 275/192/2009-IT (B)
New Delhi Dated the 9th February, 2010.
Sub: Clarification regarding deduction in respect of contribution to pension scheme under Section 80 CCD – matter reg.
A number of representations have been received regarding deduction under Section 80 CCD for contribution made under pension scheme in the light of Circular No-1 /2010 dated 11th Jan'2010 issued on the subject of Deduction of Tax at Source etc.
It is clarified that in accordance with the provisions of Section 80 CCD, deduction in respect of contribution made by an individual in the previous year to his account under a pension scheme notified, is allowed in computation of his total income –
(a) in the case of an employee, ten per cent of his salary in the previous
year; and
(b) in any other case, ten per cent of his gross total income in the
previous year.
2. It is further clarified that where the Central Government or any other
employer makes any contribution to the account of employee for the pension scheme, the assessee shall also be allowed a deduction in the computation of his total income of the whole of the amount contributed by the Central Govt. or any other employer as does not exceed 10% of his salary in the previous year.
3. Salary for the purpose of above section (80 CCD) includes dearness allowance if the terms of employment so provide, but excludes all other allowances and perquisites.
4. It is further clarified that aggregate limit of deduction under this section (80CCD) along with Sections 80 C, 80 CCC shall not in any case exceed Rs. onelakh.
Yours faithfully,
(Ansuman Pattnaik)
Director (Budget)
To,
All DDOs of Central Government, State Governments, CAG & other persons as per standard list
Deduction in respect of contribution to pension scheme of Central Government.
80CCD. (1) Where an assessee, being an individual employed by the Central Government 18[or any other employer] on or after the 1st day of January, 2004, 18a[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 18b[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, ten per cent of his gross total income in the previous year.]
(2) Where, in the case of an assessee referred to in sub-section (1), the Central Government 18[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 18c[or any other employer] as does not exceed ten per cent of his salary in the previous year.
(3) Where any amount standing to the credit of the assessee in his account referred to in sub-section (1), in respect of which a deduction has been allowed under that sub-section 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
(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.
19[(4) Where any amount paid or deposited by the assessee has been allowed as a deduction under sub-section (1),—
(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.]
19a[(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.]
Section 192 of the Income-tax Act, 1961 - Deduction of tax at source - Salary - Income-tax deduction from salaries during the financial year 2009-10
Circular No. 1/2010 [F. No. 275/192/2009 IT(B)], dated 11-1-2010
C. As per the provisions of section 80CCD, where an assessee, being an individual employed by the Central Government on or after the 1st day of January, 2004, has in the previous year paid or deposited any amount in his account under a pension scheme as notified vide Notification No. F.N. 5/7/2003-ECB & PR, dated 22-12-2003, he shall 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 ten per cent of his salary in the previous year.
The benefit of new pension scheme has been extended to any other employees (also self-employed person) with retrospective effect from 1-4-2009 and deduction is allowed to employees up to 10 per cent of salary in the previous year and in other cases up to 10 per cent of his gross total income in the previous year. Further it has been specified that with retrospective effect from 1-4-2009 any amount received by the assessee from the new pension scheme shall be deemed not to have received in the previous year if such amount is used for purchasing an annuity plan in the previous year.
Where any amount standing to the credit of the assessee in his account under such pension scheme, in respect of which a deduction has been allowed as per the provisions discussed above, together with the amount accrued thereon, if any, is received by the assessee or his nominee, in whole or in part, in any financial year,
(a) on account of closure or his opting out of such pension scheme; 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) above shall be deemed to be the income of the assessee or his nominee, as the case may be, in the financial year in which such amount is received, and shall accordingly be charged to tax as income of that financial year.
For the purposes of deduction under section 80CCD, salary includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.
The aggregate amount of deduction under sections 80C, 80CCC and 80CCD shall not exceed Rs. 1,00,000 (section 80CCE)
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Best Wishes
CA. V.M.V.SUBBA RAO
Chartered Accountant
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