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The entire Section 80 CCD deals with tax benefits provided on the basis of contributions made to the pension fund schemes notified by the central government.

There are various sub sections to Section 80CCD of income tax act. Apart from the sections mentioned above, there are few sections that deal with how the money is treated, tax treatment of premature  withdrawals, and other rules and regulations regarding money deposited in your pension fund account. 80 CCD deduction is not limited to part 1 for the employees. There is an additional benefit available under section 80CCD(1B).

These income tax deductions sections are for investments made in a pension scheme notified by the central government. 80CCD (1) deals with the investment or contribution made by an employer to such a pension scheme whereas section 80CCD (2) deals with employer contribution to an employee's pension account.

National Pension Scheme (NPS) is the scheme notified by the central government. The section 80CCD deals with tax deduction and reliefs given for contributions made to the pension fund account.

Following is the detailed overview about Section 80CCD (1) and 80CCD(2).

Section 80CCD1 allows every tax paying individual of India to get tax deduction benefits from the amount you deposit in your NPS account. This tax benefit is open to both: employed and self employed.

This section applies to all such individuals and is even open to NRIs aged between 18 to 60.

Your total 80CCD exemption limit reduces your total tax liability to the government.

However there is a limit to how much you can claim under section 80 CCD (1) like all other income tax deductions given by the government.

Section 80CCD 2 refers to a tax benefit for employers in respect to a contribution made to the pension scheme. If your employer contributes to your NPS account, your employer gets a tax benefit under section 80CCD 2. This tax benefit is limited to 20% of the total income of the employer in the previous year.

Sections 80CCD1 and (2) fall under the larger section 80CCD of the Income Tax Act, 1961. These sections were introduced in 2004 after the National pension Scheme (NPS) was introduced for the first time in the country.

Here are some of the key terms and conditions that are to be adhered to-

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