CTC of employee increases but his tax burden does not

1. Sec 80CCD(2)

This section has been effectively used by some employers to benefit their employees (beyond the 1,00,000 limit of sections 80C, 80CCC and sub section (1) of Section 80CCD). 

 

 

"It may be noted that the contribution made by the Central Government or any other employer, towards a pension scheme notified for section 80 CCD, shall be allowed as deduction in the computation of total income of the employee to the extent that it does not exceed ten percent of employee's salary. W.e.f. 01.04.2011 (FY 2011-12), the amount of deduction so allowed shall be outside the overall limit of Rs one lakh under section 80CCE of the Income Tax Act, 1961. It is therefore, clarified that contribution made by an employee alone will be eligible to deduction limit of upto Rs.one lakh. The contribution made by the Central Government or any other employee to a pension scheme u/s 80CCD(2) shall be excluded from the limit of one lakh rupees provided under Section 80CCE."

 

Accordingly, the aggregate amount of deduction under sections 80C, 80CCC and sub section (1) of Section 80CCD shall not exceed Rs.1,00,000/- (Section 80CCE). (excluding Section 80CCD(2).)

 

Please refer Circular 5/2011 of the Income-tax Department.