Definition
Section 80CCD(1B)
Section 80CCD(1B) provides an additional tax deduction for voluntary contributions to the NPS, over and above the Section 80C limit.
Section 80CCD(1B) offers an extra deduction for money you put into the National Pension System (NPS) that is separate from, and in addition to, the overall Section 80C ceiling. This makes NPS attractive for taxpayers who have already exhausted 80C.
The deduction is capped at a fixed additional amount per year. There is also a related provision, 80CCD(2), for the employer's NPS contribution, which is available even under the new regime within prescribed limits.
The 80CCD(1B) self-contribution benefit itself is an old regime feature. Funds in NPS are locked until retirement, so treat this as a long-term retirement allocation rather than a flexible tax-saver.
Related terms
- Section 80CSection 80C allows a deduction from taxable income for specified investments and expenses, such as EPF, PPF, ELSS, life insurance premiums and home-loan principal, under the old regime.
- Atal Pension Yojana (APY)APY is a government pension scheme aimed at workers in the unorganised sector, guaranteeing a fixed monthly pension after 60.
- NPS (National Pension System)The National Pension System is a government-backed, market-linked retirement scheme regulated by PFRDA that builds a corpus over your working life and converts part of it into a pension.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.