Legal Changes/ SAP Notes

  2168787 – Additional Deduction Under Section 80CCD(1B)

Symptom

As per Union Finance Bill 2015 there has been an amendment to Section 80CCD. The amendment says that Sub-section(1A) has been omitted and a new sub-section (1B) has been introduced.

The Sub-section (1B) is in addition to the deduction allowed under Sub-section(1), under a pension scheme notified or as may be notified by the Central Government and shall not exceed fifty thousand rupees.

Example:

CASE 1:

If an Employee ‘X’ has monthly salary of 1 Lakhs and he contributes 2 Lakhs towards NPS in a Financial Year and he has no other investments. He shall be able to claim total deduction as per calculation shown below:

(a) 10% of Annual NPS basis = 10% * 1200000 = 120000 INR

(b) Total NPS contribution = 200000 INR

Deduction u/s 80CCD(1) = 1.2 Lakhs [ Minimum of (a) , (b)]

Deduction u/s 80CCD(1B) = 50,000 INR

Total Deduction for  = 1.2 Lakhs [80CCD(1) + 50,000 [80CCD(1B)] = 1.7 Lakhs

CASE 2:

If an Employee ‘X’ has monthly salary of 1 Lakh having contribution towards LIC as 1.2 Lakhs. He invests another 50,000 in NPS in the same Financial Year. He shall be able to claim total deduction as per calculation shown below:

(a) 10% of Annual NPS basis = 10% * 1200000 = 120000 INR

(b) Total NPS contribution = 50,000 INR

(c) Contribution towards LIC = 1.2 Lakhs

(d) Remaining deduction allowed under 80CCE = 30,000 INR

Deduction u/s 80CCD(1) = 30,000 INR [ Minimum of (a) , (b) , (d) ]

Deduction u/s 80CCD(1B) = 20,000 INR

Total Deduction = 1.2 Lakhs [80C] + 30,000 [80CCD(1)] + 20,000 [80CCD(1B) = 1.7 Lakhs

Other Terms

Additional Deduction Under Section 80CCD(1B), NPS, Section 80CCD, 80CCD, 80CCD(1B), INS80, INS88, /432, /3I1, /3I7, /3I9, National Pension System, Finance Bill

Reason and Prerequisites

Legal Change

Pre-Requisite Support Pack Level

Solution

The inconsistency described under Symptom is resolved.

To get the changes,apply the HR Support Package(s) indicated for your release in the ‘Reference to Support Packages’ section of this note.

Alternatively, Perform the below steps in the same sequence:

• Implement the Manual Steps as described in the attached document (Manual_steps_80CCD1B.pdf)
• Apply the correction instructions attached to this note
• In case you use ESS Tax Simplifier Statement then follow the steps described in attached document (Manual_Steps_TSS.PDF)

  Note:

• Section 80CCD(1B) is a deduction from total income which is in addition to the deduction allowed under section 80CCD(1)                                                                      
• As per Finance Bill 2015 the deduction under 80CCD(1B) shall not exceed INR 50,000 and it also states that:

               “ No deduction under (1B) shall be allowed in respect of the amount on which a deduction has been claimed and allowed under sub- section (1). “

        which implies that the deduction under 80CCD(1) will be considered first and will be part of 80CCE

• For providing the deduction under 80CCD(1), 10% of annual NPS Basis acts as one of the factors
• You need to ensure that cumulation class ‘43’ & ‘44’ are checked / ticked for all relevant wage types which forms the monthly basis for NPS
• Ensure that there is forced retro for employees from Month of April to have correct value of annual NPS basis
• There will not be any extra/separate line item in Infotype 0585 for 80CCD(1B) contribution. You can continue to maintain the contribution towards NPS in IT 0585 under line item “Contribution to pension scheme of Central Government”
• Payroll will generate the following exemption Wagetypes:

        /3I7 : 80CCD(1)

        /3I9 : 80CCD(1B)

        /3I5 : Combined Employee 80CCD Exemption ( /3I7 + /3I9 )

Header Data

Validity

Correction Instructions

Support Packages & Patches

Attachments

Cheers

Ratan