Section 80CCD(2)

ExpressITR || 80CCD(2) Employer's Contribution to NPS Deduction Calculation


80CCD(2) Employer's Contribution to NPS Deduction

Under Section 80CCD(2), a deduction is available for the employer's contribution to the National Pension System (NPS). Employers can contribute to NPS in addition to contributions made to the Public Provident Fund (PPF) and Employees' Provident Fund (EPF). The employer's contribution can be equal to or higher than the employee's contribution.
This section specifically addresses the employer's contribution to an employee's NPS account, which employees can claim as a deduction under Section 80CCD(2).

  1. Sections of IT Act, 1961 :  Section 80CCD (2).
  2. Tax Deduction Details : Contributions made by the employer to the NPS/ Atal Pension Yojana accounts of their employee.
  3. Tax Benefits : Up to 10% of salary (basic+ DA) for private-sector employees OR Up to 14% of salary (basic+ DA) for government employees.
  4. Can I claim 80CCD 2 in the new tax regime ? : While the new tax regime offers the NPS benefit only under Section 80CCD (2), the old tax regime allows three deductions under Sections 80CCD (1) (₹1.5 lakh), 80CCD (1B) (₹50,000) and 80CCD (2). However, the higher limit of 14% is only for those who opt for the new tax regime.

Notes
Feeding Process in Express ITR

Step 1: Open the Client Profile → Navigate to ITR Summary → Select Return Flow → Open the Salary Head.

      

Step 2: Select Employer Type: Central Government, State Government, PSU, Pensioner, Others

      

Enter Basic Salary and Dearness Allowance (DA) in their respective columns.

Step 3: Go to the Deductions section and enter the deduction amount received from the employer.

      


Calculation Formula for NPS Deduction under Section 80CCD(2):
  1. For Government Employees:
    1. 14% of Salary (Basic + Dearness Allowance)
    2. Actual Amount Received from the Employer
    3. Deduction Allowed: The lesser of the above two amounts.
  2. For Non-Government Employees (Private Sector):
    1. 10% of Salary (Basic + Dearness Allowance)
    2. Actual Amount Received from the Employer
    3. Deduction Allowed: The lesser of the above two amounts.

We hope this guide assists you in accurately calculating the eligible deductions under Section 80CCD(2) for your NPS contributions.

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