My client is in the default regime under s.115BAC. Can he still claim the extra fifty thousand for NPS, and what is the ceiling on his employer's NPS contribution now?
No on the first, better news on the second. Section 115BAC(2)(i) computes the total income of a person taxed under s.115BAC(1A) without any deduction under Chapter VI-A other than sub-section (2) of section 80CCD, sub-section (2) of section 80CCH and section 80JJAA — so the additional Rs. 50,000 deduction under s.80CCD(1B) is not available in the default regime, while the employer's contribution deduction under s.80CCD(2) is. On the ceiling: s.80CCD(2) allows fourteen per cent of salary where the contribution is made by the Central Government or a State Government and ten per cent where it is made by any other employer, but a proviso inserted by Act No. 15 of 2024 with effect from 1 April 2025 provides that where the total income is chargeable to tax under s.115BAC(1A), sub-section (2) has effect as if for the words "ten per cent" in clause (b) the words "fourteen per cent" had been substituted.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2025-04-01, reported as Income-tax Act, 1961, s.80CCD, as printed on the departmental Year 2025 page with its footnote; s.115BAC(2)(i), as printed on the departmental Year 2025 and Year 2024 (No. 1) pages. It bears on section 80CCD, section 80CCD(1), section 80CCD(1B), section 80CCD(2), section 115BAC, section 115BAC(1A), section 115BAC(2), section 80CCH(2), section 80JJAA, section 17(2)(vii) of the Income Tax Act 1961, in Salary & Perquisites and Deductions & Disallowances matters.
This is the planning decision every salaried client now faces, and the two sub-sections point in opposite directions. Section 80CCD(1B) is the employee's own additional Rs. 50,000, allowed whether or not a deduction is allowed under sub-section (1), with a proviso barring a double deduction for an amount already claimed and allowed under sub-section (1) — and it is simply gone in the default regime. Section 80CCD(2) is the employer's contribution, and not only does it survive s.115BAC, it is worth MORE there for a private-sector employee: from assessment year 2025-26 the private-employer limit rises from ten to fourteen per cent of salary if the employee's income is chargeable under s.115BAC(1A). That is a real reason to restructure a salary package into employer NPS contribution for a client who has moved to the default regime. Three cautions. First, the fourteen per cent for a Government employer under clause (a) is unconditional and does not depend on the regime; the proviso only lifts clause (b). Second, s.80CCD(2) is a deduction of the employer's contribution, and the same contribution is a perquisite under s.17(2)(vii) so far as the aggregate of employer contributions to the recognised provident fund, the s.80CCD(1) scheme and an approved superannuation fund exceeds Rs. 7,50,000 — the deduction and the perquisite charge are separate provisions and both apply. Third, the departmental page prints a second proviso to sub-section (1B), to be inserted by the Finance Act 2025 with effect from 1 April 2026, extending the deduction to a payment or deposit made by a parent or guardian to the account of a minor under the pension scheme, with the aggregate deduction under the sub-section still not exceeding Rs. 50,000 — note that it takes effect from assessment year 2026-27 and, on the same reasoning as above, sub-section (1B) remains outside s.115BAC(1A).
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
Read aloud by your device. Press again to stop.
As printed on the Year 2025 departmental page, section 80CCD(1) allows an individual employed by the Central Government on or after 1 January 2004, an individual employed by any other employer, or any other individual assessee, a deduction of the amount paid or deposited in his account under a notified pension scheme, not exceeding ten per cent of salary in the case of an employee and twenty per cent of gross total income in any other case. Sub-section (1A) is printed as omitted. Sub-section (1B) allows a deduction, whether or not a deduction is allowed under sub-section (1), of the whole of the amount paid or deposited in the previous year in the assessee's account under such a scheme, which shall not exceed fifty thousand rupees, with a proviso that no deduction shall be allowed under the sub-section in respect of an amount on which a deduction has been claimed and allowed under sub-section (1); the page also prints, under the heading "Following second proviso shall be inserted after the proviso to sub-section (1B) of section 80CCD by the Finance Act, 2025, w.e.f. 1-4-2026", a further proviso extending the deduction to payments or deposits made to the account of a minor by a parent or guardian, subject to the aggregate deduction under the sub-section not exceeding fifty thousand rupees. Sub-section (2) allows a deduction of the whole of the employer's contribution as does not exceed (a) fourteen per cent where the contribution is made by the Central Government or the State Government and (b) ten per cent where it is made by any other employer, of salary in the previous year, followed by a proviso, carrying footnote 80, that where the total income of the assessee is chargeable to tax under sub-section (1A) of section 115BAC, sub-section (2) shall have effect as if for the words "ten per cent" referred to in clause (b) the words "fourteen per cent" had been substituted. Footnote 80 reads "Ins. by Act No. 15 of 2024, w.e.f. 1-4-2025." Section 115BAC(2), as printed on the Year 2025 departmental page, provides that for the purposes of sub-section (1A) the total income shall be computed "without any exemption or deduction under the provisions of clause (5) or clause (13A) or prescribed under clause (14) (other than those as may be prescribed for this purpose) or clause (17) or clause (32), of section 10 or section 10AA or clause (ii) or clause (iii) of section 16 or clause (b) of section 24 [in respect of the property referred to in sub-section (2) of section 23] or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35 or section 35AD or section 35CCC or under any of the provisions of Chapter VI-A other than the provisions of sub-section (2) of section 80CCD or sub-section (2) of section 80CCH or section 80JJAA".
Under section 115BAC(1A) the total income is computed without any deduction under Chapter VI-A other than section 80CCD(2), section 80CCH(2) and section 80JJAA, so the additional deduction of up to fifty thousand rupees under section 80CCD(1B) is not available in that regime while the deduction for the employer's contribution under section 80CCD(2) is. The section 80CCD(2) ceiling is fourteen per cent of salary where the contribution is made by the Central Government or a State Government and ten per cent where it is made by any other employer, but by a proviso inserted by Act No. 15 of 2024 with effect from 1 April 2025 the ten per cent in clause (b) is read as fourteen per cent where the assessee's total income is chargeable to tax under section 115BAC(1A).
Not applicable — this is a statement of statutory text and of the departmental amendment footnote attached to the proviso. No judicial reasoning is involved.
Provided that where the total income of the assessee is chargeable to tax under sub-section (1A) of section 115BAC, the provisions of sub-section (2) shall have effect as if for the words "ten per cent" referred to in clause (b), the words "fourteen per cent" had been substituted.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppNo on the first, better news on the second. Section 115BAC(2)(i) computes the total income of a person taxed under s.115BAC(1A) without any deduction under Chapter VI-A other than sub-section (2) of section 80CCD, sub-section (2) of section 80CCH and section 80JJAA — so the additional Rs. 50,000 deduction under s.80CCD(1B) is not available in the default regime, while the employer's contribution deduction under s.80CCD(2) is. On the ceiling: s.80CCD(2) allows fourteen per cent of salary where the contribution is made by the Central Government or a State Government and ten per cent where it is made by any other employer, but a proviso inserted by Act No. 15 of 2024 with effect from 1 April 2025 provides that where the total income is chargeable to tax under s.115BAC(1A), sub-section (2) has effect as if for the words "ten per cent" in clause (b) the words "fourteen per cent" had been substituted. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 80CCD, section 80CCD(1), section 80CCD(1B), section 80CCD(2), section 115BAC, section 115BAC(1A), section 115BAC(2), section 80CCH(2), section 80JJAA, section 17(2)(vii) of the Income Tax Act 1961. It is reported as Income-tax Act, 1961, s.80CCD, as printed on the departmental Year 2025 page with its footnote; s.115BAC(2)(i), as printed on the departmental Year 2025 and Year 2024 (No. 1) pages. This is the planning decision every salaried client now faces, and the two sub-sections point in opposite directions. Section 80CCD(1B) is the employee's own additional Rs. 50,000, allowed whether or not a deduction is allowed under sub-section (1), with a proviso barring a double deduction for an amount already claimed and allowed under sub-section (1) — and it is simply gone in the default regime. Section 80CCD(2) is the employer's contribution, and not only does it survive s.115BAC, it is worth MORE there for a private-sector employee: from assessment year 2025-26 the private-employer limit rises from ten to fourteen per cent of salary if the employee's income is chargeable under s.115BAC(1A). That is a real reason to restructure a salary package into employer NPS contribution for a client who has moved to the default regime. Three cautions. First, the fourteen per cent for a Government employer under clause (a) is unconditional and does not depend on the regime; the proviso only lifts clause (b). Second, s.80CCD(2) is a deduction of the employer's contribution, and the same contribution is a perquisite under s.17(2)(vii) so far as the aggregate of employer contributions to the recognised provident fund, the s.80CCD(1) scheme and an approved superannuation fund exceeds Rs. 7,50,000 — the deduction and the perquisite charge are separate provisions and both apply. Third, the departmental page prints a second proviso to sub-section (1B), to be inserted by the Finance Act 2025 with effect from 1 April 2026, extending the deduction to a payment or deposit made by a parent or guardian to the account of a minor under the pension scheme, with the aggregate deduction under the sub-section still not exceeding Rs. 50,000 — note that it takes effect from assessment year 2026-27 and, on the same reasoning as above, sub-section (1B) remains outside s.115BAC(1A). If it applies to you, the first step is this: Establish which regime the client is in before advising on either sub-section. Under s.115BAC(1A) the Chapter VI-A door is shut except for s.80CCD(2), s.80CCH(2) and s.80JJAA.
As printed on the Year 2025 departmental page, section 80CCD(1) allows an individual employed by the Central Government on or after 1 January 2004, an individual employed by any other employer, or any other individual assessee, a deduction of the amount paid or deposited in his account under a notified pension scheme, not exceeding ten per cent of salary in the case of an employee and twenty per cent of gross total income in any other case. Sub-section (1A) is printed as omitted. Sub-section (1B) allows a deduction, whether or not a deduction is allowed under sub-section (1), of the whole of the amount paid or deposited in the previous year in the assessee's account under such a scheme, which shall not exceed fifty thousand rupees, with a proviso that no deduction shall be allowed under the sub-section in respect of an amount on which a deduction has been claimed and allowed under sub-section (1); the page also prints, under the heading "Following second proviso shall be inserted after the proviso to sub-section (1B) of section 80CCD by the Finance Act, 2025, w.e.f. 1-4-2026", a further proviso extending the deduction to payments or deposits made to the account of a minor by a parent or guardian, subject to the aggregate deduction under the sub-section not exceeding fifty thousand rupees. Sub-section (2) allows a deduction of the whole of the employer's contribution as does not exceed (a) fourteen per cent where the contribution is made by the Central Government or the State Government and (b) ten per cent where it is made by any other employer, of salary in the previous year, followed by a proviso, carrying footnote 80, that where the total income of the assessee is chargeable to tax under sub-section (1A) of section 115BAC, sub-section (2) shall have effect as if for the words "ten per cent" referred to in clause (b) the words "fourteen per cent" had been substituted. Footnote 80 reads "Ins. by Act No. 15 of 2024, w.e.f. 1-4-2025." Section 115BAC(2), as printed on the Year 2025 departmental page, provides that for the purposes of sub-section (1A) the total income shall be computed "without any exemption or deduction under the provisions of clause (5) or clause (13A) or prescribed under clause (14) (other than those as may be prescribed for this purpose) or clause (17) or clause (32), of section 10 or section 10AA or clause (ii) or clause (iii) of section 16 or clause (b) of section 24 [in respect of the property referred to in sub-section (2) of section 23] or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35 or section 35AD or section 35CCC or under any of the provisions of Chapter VI-A other than the provisions of sub-section (2) of section 80CCD or sub-section (2) of section 80CCH or section 80JJAA". The matter was decided on 2025-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Under section 115BAC(1A) the total income is computed without any deduction under Chapter VI-A other than section 80CCD(2), section 80CCH(2) and section 80JJAA, so the additional deduction of up to fifty thousand rupees under section 80CCD(1B) is not available in that regime while the deduction for the employer's contribution under section 80CCD(2) is. The section 80CCD(2) ceiling is fourteen per cent of salary where the contribution is made by the Central Government or a State Government and ten per cent where it is made by any other employer, but by a proviso inserted by Act No. 15 of 2024 with effect from 1 April 2025 the ten per cent in clause (b) is read as fourteen per cent where the assessee's total income is chargeable to tax under section 115BAC(1A).
Not applicable — this is a statement of statutory text and of the departmental amendment footnote attached to the proviso. No judicial reasoning is involved. In the words reproduced by the source cited on this page: "Provided that where the total income of the assessee is chargeable to tax under sub-section (1A) of section 115BAC, the provisions of sub-section (2) shall have effect as if for the words "ten per cent" referred to in clause (b), the words "fourteen per cent" had been substituted."
It was decided by the CBDT Circulars & Instructions on 2025-04-01 and is reported as Income-tax Act, 1961, s.80CCD, as printed on the departmental Year 2025 page with its footnote; s.115BAC(2)(i), as printed on the departmental Year 2025 and Year 2024 (No. 1) pages. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 80CCD, section 80CCD(1), section 80CCD(1B), section 80CCD(2), section 115BAC, section 115BAC(1A), section 115BAC(2), section 80CCH(2), section 80JJAA, section 17(2)(vii), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Under section 115BAC(1A) the total income is computed without any deduction under Chapter VI-A other than section 80CCD(2), section 80CCH(2) and section 80JJAA, so the additional deduction of up to fifty thousand rupees under section 80CCD(1B) is not available in that regime while the deduction for the employer's contribution under section 80CCD(2) is. The section 80CCD(2) ceiling is fourteen per cent of salary where the contribution is made by the Central Government or a State Government and ten per cent where it is made by any other employer, but by a proviso inserted by Act No. 15 of 2024 with effect from 1 April 2025 the ten per cent in clause (b) is read as fourteen per cent where the assessee's total income is chargeable to tax under section 115BAC(1A). It arises in Salary & Perquisites and Deductions & Disallowances matters, on section 80CCD, section 80CCD(1), section 80CCD(1B), section 80CCD(2), section 115BAC, section 115BAC(1A), section 115BAC(2), section 80CCH(2), section 80JJAA, section 17(2)(vii) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Do not claim s.80CCD(1B) in a default-regime return. It is not one of the three survivors named in s.115BAC(2)(i). For a private-sector client in the default regime, compute the s.80CCD(2) ceiling at fourteen per cent of salary and not ten, for assessment year 2025-26 onwards, relying on the proviso inserted by Act No. 15 of 2024 with effect from 1 April 2025. For a client in the old regime, the private-employer ceiling remains ten per cent; the proviso operates only where the total income is chargeable under s.115BAC(1A). Where the employer contribution is being increased to use the fourteen per cent headroom, test it against s.17(2)(vii) at the same time — the aggregate of employer contributions to the provident fund, the NPS scheme and an approved superannuation fund above Rs. 7,50,000 is a perquisite in the employee's hands. If a s.80CCD(1) deduction has already been claimed for an amount, do not claim it again under sub-section (1B); the proviso to sub-section (1B) bars it in terms.
Still good law. The restriction in s.115BAC(2)(i) was read on two departmental editions a year apart which print the same closing words naming s.80CCD(2), s.80CCH(2) and s.80JJAA as the only Chapter VI-A survivors. The s.80CCD(2) proviso and its commencement come from the Year 2025 page's own amendment footnote, "Ins. by Act No. 15 of 2024, w.e.f. 1-4-2025", which was demanded expressly; the Year 2023 edition of s.80CCD does not carry the proviso, which is independent year-stamped support for that date. No Finance Act text was retrieved this pass and the footnote is the only evidence for the enacting Act, so a reader who needs certainty should check Act No. 15 of 2024 itself. The second proviso to s.80CCD(1B) is printed as one that "shall be inserted" by the Finance Act 2025 with effect from 1 April 2026; it is stated here as the page states it and has not been verified against the Finance Act. I did not carry out any check of judicial treatment of s.80CCD or s.115BAC. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
SOURCING AND THE PROBES BEHIND IT. Section 80CCD was transcribed this pass from https://incometaxindia.gov.in/w/section-80ccd-21, which printed the Act name "Income-tax Act, 1961", the heading "Deduction in respect of contribution to pension scheme of Central Government" and the stamp "Year: 2025". Suffixes probed on the way there, recorded so a later pass need not repeat them: /w/section-80ccd-4 (Year: 2004, no sub-section (1B) at all), /w/section-80ccd-13 (Year: 2017, has (1B) and (2)), /w/section-80ccd-18 (Year: 2023, has the fourteen per cent for Government employers in clause (a) but NOT the s.115BAC proviso) and /w/section-80ccd-21 (Year: 2025, has the proviso). The Year 2023 page is a good example of the danger the brief warns about: it is genuine, it prints "fourteen per cent", and reading the private-sector position off it would produce exactly the wrong answer. THE PROVISO'S DATE COMES FROM THE PAGE'S OWN FOOTNOTE, which I asked for expressly and which reads, in full: "80. Ins. by Act No. 15 of 2024, w.e.f. 1-4-2025." That is the Finance (No. 2) Act, 2024. I did not read the Finance Act text itself and state only what the footnote says. SECTION 115BAC(2)(i) was read on two departmental pages: https://incometaxindia.gov.in/w/section-115bac-6, which printed the heading "Tax on income of individuals, Hindu undivided family and others" and the stamp "Year: 2025" and which opens sub-section (2) with the words "For the purposes of sub-section (1A)"; and https://incometaxindia.gov.in/w/section-115bac-4 (Year: 2024 (No. 1), heading "Tax on income of individuals and Hindu undivided family"). BOTH print the same closing words — "under any of the provisions of Chapter VI-A other than the provisions of sub-section (2) of section 80CCD or sub-section (2) of section 80CCH or section 80JJAA". The Year 2025 page carries footnote 38 against clause (i), reading "Sub. by Act No. 08 of 2023, w.e.f. 1-4-2024. Earlier, sub-section (2)(i) was amended by Act No. 08 of Act, 2023, w.e.f. 1-4-2023" — that footnote as printed is internally odd ("Act No. 08 of Act, 2023") and I reproduce it rather than interpret it; nothing in this entry turns on it. https://incometaxindia.gov.in/w/section-115bac-8 returned HTTP 404. WHAT I DID NOT DO: I did not read section 80CCH or section 80JJAA this pass and say nothing about their conditions; I did not read the notification constituting the pension scheme referred to in s.80CCD(1); and I did not read the definition of "salary" for the purposes of s.80CCD(2), so the reader should establish that separately before computing the percentage. Sub-section (1A) is printed on the Year 2025 page as "[***]", that is, omitted. 'decided_on' is a LABELLED PLACEHOLDER set to 1 April 2025, the commencement date the departmental footnote gives for the s.115BAC proviso to s.80CCD(2); it is not a decision date. 'bench' and 'favours' are inapplicable to a statutory entry. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Under section 115BAC(1A) the total income is computed without any deduction under Chapter VI-A other than section 80CCD(2), section 80CCH(2) and section 80JJAA, so the additional deduction of up to fifty thousand rupees under section 80CCD(1B) is not available in that regime while the deduction for the employer's contribution under section 80CCD(2) is. The section 80CCD(2) ceiling is fourteen per cent of salary where the contribution is made by the Central Government or a State Government and ten per cent where it is made by any other employer, but by a proviso inserted by Act No. 15 of 2024 with effect from 1 April 2025 the ten per cent in clause (b) is read as fourteen per cent where the assessee's total income is chargeable to tax under section 115BAC(1A).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
Your s.148 notice came from your own local officer, not from the faceless unit. Does that matter?
Is there one document that tells the payroll department how to deduct on salary for the year?
I filed my return under the new regime by default, then filed a revised return within time switching to the old regime and claiming my exemptions and Chapter VI-A deductions. The CPC has processed it under the new regime saying the regime cannot be changed in a revised return. Can it?
CPC has denied my HUF the s.80GG deduction for rent paid, saying only an individual can claim it. Is that right?