Section 80CCD is applicable to an Individual in the employment of Central Government or any other employer on or after 1-1-2004 or any other tax payer being an individual. From assessment year 2009-10 onwards, even a self employed person can take benefit of section 80CCD deduction.
The tax payer will be eligible for deduction under section 80CCD if deposit or payment made by the employee and Central Government or individual under a pension scheme notified by the Central Government. No deduction is allowed under section 80C in respect of contribution claimed as deduction under this section.
Any amount received from the scheme either on closure or on the event of opting out of the pension scheme, is taxable in the hands of the taxpayer or nominee in the year of such receipt.
Salary for the purpose of this section includes dearness allowance, if the terms of employment so provide, but excludes all other allowances or perquisites.
For the purposes of section 80CCD, the tax payer or 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.
Extent of Deduction under section 80CCD
A) Aggregate of (a) Amount paid or deposited by the employee and (b) Amount paid or deposited by the Central Government. The total deduction shall be restricted to maximum 10% of salary.
B) Amount deposited by individual, subject to 10% of total income, in a previous year
Note: From assessment year 2012 – 2013 onwards the aggregate amount of deduction under section 80C, 80CCC and 80CCD (1) can not exceed Rs. 100000