Salary Restructuring

What is Section 80CCD?

Section 80CCD of the Income Tax Act, 1961, provides tax deductions for contributions made to the NPS. This section is further divided into two sub-categories:

1. Section 80CCD(1): This subsection deals with deductions for contributions made by individuals, including both salaried and self-employed individuals.
2. Section 80CCD(2): This sub-section allows deductions for contributions made by employers on behalf of their employees.

• Understanding Section 80CCD(1)

Under Section 80CCD(1), individuals can claim a deduction for their contributions to the NPS. The maximum deduction allowed is 10% of the individual's salary for salaried employees in the previous year and 20% of their gross income for self-employed individuals in the previous year. However, this deduction is within the overall limit of Section 80C, which is capped at Rs. 1.5 lakh.

• Section 80CCD(2): Employer's Contribution

Section 80CCD(2) allows employees to claim a deduction for contributions made by their employer to the NPS. The maximum deduction allowed is 10% of the employee's salary. This deduction is not subject to the overall limit of Section 80C.