Calculation of deduction under Section 80CCD (1).
Mr. Rajesh is a Central Government Employee with a Basic Salary of ₹500000 and a Dearness Allowance of ₹90000. He contributes ₹50000 to the NPS Account. In addition, he has paid the premium for a life insurance policy of about ₹60000.
The maximum allowable claim under Section 80CCD (1) is the lower among the following:
- Contribution to NPS - ₹50000
- 10% of basic salary and dearness allowance - ₹59000
Restricted to the unexhausted limit of 80C deductions of ₹90000(₹150000 - ₹60000).
The maximum allowable deduction under Section 80CCD (1) is ₹50000. However, if the deductions that qualify under Section 80C is ₹120000, the deduction under Section 80CCD (1) is ₹30000(restricted to the unexhausted limit of 80C deductions, i.e., ₹150000 - 120000).