I am a central government employee. I have invested ₹1.5 lakh in Public Provident Fund (PPF). I also contribute around ₹72,000 per year to National Pension System (NPS). The government, my employer, also contributes a matching amount. I want to know whether I can claim my PPF investment of ₹1.5 lakh under Section 80C and the additional ₹50,000 under Section 80CCD(1) on my contribution to NPS?
- Mukesh Sah
An employee's contribution is eligible for tax deduction of up to 10 per cent of his salary (basic + DA) under Section 80CCD(1) within the overall ceiling of ₹1.5 lakh under Section 80CCE. The employee is also eligible for tax deduction of up to 10 per cent of his salary (basic + DA) contributed by the employer under Section 80CCD(2) over and above the limit of ₹1.5 lakh provided under Section 80CCE. As per the last Budget, an additional tax deduction of up to ₹50,000 can be claimed under Section 80CCD(1B) on investments in NPS. However, the aggregate amount of deduction under section 80C, 80CCC and 80CCD(1) cannot exceed ₹1.5 lakh.
That means you can claim a total tax deduction of ₹2 lakh like this: Your contribution to NPS is ₹72,000. You can claim a deduction of ₹50,000 under section 80CCD(1B) and ₹22,000 under section 80CCD(1). The remaining ₹1.28 lakh (₹1.5 lakh - ₹22,000) can be claimed under section 80C on your investment in PPF.