Can I include my employer's contribution to NPS in my taxable income?1 min read . Updated: 08 Oct 2020, 09:50 PM IST
Contribution made by an employer is allowed under Section 80 CCD(2) subject to a ceiling of 10% of the salary (14% for central government employees).
My employer contributes 10 % of my basic salary+ D.A. to National Pension System (NPS)Will this be included in investment ceiling of ₹1,50,000 or is it is separate from the ₹1.50 lakh limit.
By Balwant Jain, Chief Editor, ApnaPaisa
The tax deduction for NPS is available under Section 80 CCD of Income Tax. Contribution made by an employer is allowed under Section 80 CCD(2) subject to a ceiling of 10% of the salary (14% for central government employees). However if the aggregate of contributions made by the employer towards employee provident fund (EPF), NPS and superannuation exceeds rupees 7.50 lakh in a year, the excess is treated as taxable perquisite.
Separate deductions are allowed for contributions made by the taxpayer himself to the NPS account under two Sections. Under section 80 CCD(1) contribution made by the tax payer is eligible for deduction upto ₹1.50 lakh, along with other eligible items, as per the limits laid down under Section 80 CCE, which also covers the various items of section 80 C and 80 CCC. This deduction is subject to limit of 10% of the salary for salaried (14%for Central government Employees) and for others it is capped at 20% of the gross total income.
In addition, Section 80 CCD (1B) allows an additional and exclusive deduction of ₹50,000/- for contributions made by the taxpayer himself towards NPS account over and above the one available under Section 80 CCD(1). The restriction of percentage of salary or of gross total income is not applicable for contribution made under Section 80 CCD(1B).
So the additional benefit under Section 80CCD(1B) can only be claimed in respect of contribution made by the employee himself and the same cannot be claimed for the contribution made by the employer, though effectively it is also made by the employee indirectly, for which separate deduction is available under Section 80CCD(2).
(Views as expressed by the expert.)