What is the difference between 80 CCD (1) and 80 CCD (2)?

Section 80 CCD (1) deals with deductions made by employees or self-employed individuals to NPS (National Pension Scheme). On the flip side, Section 80 CCD (2) includes contributions by employers to NPS.

Can claim both 80 C and 80 CCD?

You can avail a maximum deduction of ₹2,00,000 under Section 80 CCD. Moreover, under Section 80 CCD (1B), you can avail an additional deduction of ₹50,000. However, you cannot claim the same deductions under Section 80 CCD and 80 C of the Income Tax Act, 1961.

What is covered under 80 CCD?

Section 80 CCD includes the Atal Pension Yojana and National Pension Scheme. In addition, it includes the employer's contribution to NPS. You can avail these deductions to lower your tax liability on annual income.

Section 80 CCD of the Income Tax - Tax Benefits under NPS

Section 80 CCD of the Income Tax Act deals with deductions for contributions to the National Pension Scheme and Atal Pension Yojana. You can claim deductions under this section to reduce your tax liabilities. As a taxpayer, you need to submit investment proof within the stipulated time to claim this deduction. Learn about this section in detail before you claim this deduction.

What Is Section 80 CCD Deduction?

If you are a taxpayer and contributing to the National Pension Scheme (NPS) and Atal Pension Yojana (APY), you can claim deductions under Section 80 CCD.

Things to Keep in Mind About 80 CCD Deduction

Here are the deductions allowed under Section 80 CCD:

80 CCD (1): This section includes contributions made to NPS by salaried or self-employed individuals.
80 CCD (1B): This section deals with additional contributions to NPS by a salaried or self-employed individual.
80 CCD (2): Employer contributions to the NPS are covered under this section.

80 CCD vs New Tax Regime Under Section 115 BAC

Here are the deductions according to the 80 CCD and the new tax regime under 115 BAC:

Section	Deduction relates to	New Tax Regime	Old Tax Regime
80CCD (1)	Taxpayer's contribution to NPS	Not available	Available
80CCD (2)	Employer's contribution to NPS	Available	Available

Section 80 CCD (1)

Here are the aspects of Section 80 CCD (1):

This section presents the deductions of income tax for contributions to NPS.
You can avail the deduction under the old tax regime.
This section applies to Indian citizens contributing to NPS. The contributors need to be between the ages of 18 and 70 years.

The maximum deduction limits of this section applicable for NRIs are as follows:

Status of Employment	Maximum Deduction	Maximum Amount Allowed
Salaried Employee	10% of their salary (Basic + DA)	₹1.5 lakhs
Self Employed	20% of the Gross Total Income	₹1.5 lakhs

Additional Deduction Under Section 80 CCD (1B)

Under the old tax regime, Section 80 CCD (1B) allows a deduction of ₹50,000 for your contributions to NPS. This deduction is allowed over and above Section 80 CCD (1). Here are the deduction limits for different sections:

The deduction limit for Section 80 C, 80 CCC and 80 CCD (1) is ₹1.5 lakh.
Section 80 CCD (1B) allows a deduction of ₹50,000 with a total limit of ₹1.5 lakh.
The maximum deduction limit available under Section 80 CCD is ₹2 lakh.

Eligibility to Claim Deductions Under Section 80 CCD (2) Deductions

Here are the rules for Section 80 CCD (2):

Section 80 CCD (2) allows an additional deduction under the Income Tax Act for employers.
Salaried individuals can solely claim deductions under Section 80 CCD (2). In addition, they can claim this deduction under Section 80 CCD (1).
As an employer, you can contribute to NPS in addition to PPF (Public Provident Fund) and EPF (Employee Provident Fund).
The employee contribution can be lower than the employer's contribution.

The limits mentioned above do not include 80 CCD (2). Here are the limits for Section 80 CCD (2):

Particulars	Central / State Government Employer	Additional Employer
Old Regime	14% of salary (Basic + DA)	10% of salary (Basic + DA)
New Regime	14% of salary (Basic + DA)	14% of salary (Basic + DA)

80 CCD (1), 80 CCD (1B) and 80 CCD (2) - Comparison

The table below illustrates the differences between various sub-sections of 80 CCD:

Particulars	Section 80CCD	Section 80CCD (1B)	Section 80CCD (2)
Eligibility	Deduction for an individual’s contribution to NPS	Additional deduction for an individual’s contribution to NPS	Deduction for the employer's contribution to NPS.
Old Vs New Regime	Old Tax Regime	Old Tax Regime	Both Old and New Tax Regime
Employment Status	Assessee can be a government employee or a non-government employee, or a self-employed individual.	Assessee can be a self-employed individual, a non-government employee or a government employee.	Assessee can be a government or non-government employee.
Maximum Amount of Deduction Allowed	₹1,50,000	₹50,000	No monetary limit fixed
Deduction Limits	Salaried Employee - 10% of their salary (Basic + DA) Self-employed - 20% of the Gross Total Income		Central / State Government Employer - 14% of salary (Basic + DA) Other Employer Old Regime - 10% of salary (Basic + DA) New Regime - 14% of salary (Basic + DA)

National Pension Scheme Vs Atal Pension Yojana

Here are the important features of the Atal Pension Yojana and the National Pension Scheme:

Particulars	National Pension Scheme	Atal Pension Yojana
Optional or Mandatory	Optional for individuals other than central government employees	Optional
When can I open an account?	Until 70 years	From 18 to 40 years, with a minimum period of 20 years of contribution
Period of Withdrawal	At the age of 70 years or in the event of death	At the age of 60 years or in the case of death
Minimum Contribution	Tier - 1 Account - ₹6,000 per annum(₹500/month) Tier - 2 Account - ₹3,000 per annum(₹250/month)	You can choose an amount based on your monthly pension requirement and your present age.
Tax Deductions	Deductions under section 80CCD(1) , 80CCD(1B) and 80CCD(2) are available. Self-employed individuals can claim a deduction of a maximum of ₹1.5 lakhs for APY investments that are up to 20% of their annual income	Deduction under section 80CCD(1) , 80CCD(1B) and 80CCD(2) are available Self-employed individuals can claim a deduction of a maximum of ₹1.5 lakhs for APY investments that are up to 20% of their annual income.
Premature Withdrawals	Permitted	Permitted

Terms and Conditions for 80 CCD Deductions

Here are the terms and conditions for Section 80 CCD:

While deductions under Section 80 CCD are compulsory for government employees, it is optional for non-government employees.
You can avail a maximum deduction limit of ₹2 lakh under Section 80 CCD with an additional deduction of ₹50,000 under Section 80 CCD (1B).
As a taxpayer, you can not avail 80 CCD deduction in addition to the 80 C deduction. Notably, the total deduction under Section 80 CCD and 80C should not be more than ₹2 lakh.
The amount you receive as a monthly payment from NPS or surrender value is subject to taxation.
If you invest the amount received from NPS in annuity plans, the invested amount is exempted from taxation. Ensure you provide proof of payment to claim the tax exemptions.

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