Increase in amount allowed as deduction to non-government employers and their employees for employer contribution to a Pension Scheme referred in section 80CCD

Union Budget 2024-25 (Full) + FINANCE (No.2) Bill, 2024

Section 36 of the Act pertains to other deductions allowed while computing the income under the head ‘Profits and gains of business or profession’. Clause (iva) of sub-section (1) of said section states that any sum paid by the assessee as an employer by way of contribution towards a pension scheme, as referred to in section 80CCD of the Act, on account of an employee, to the extent it does not exceed ten per cent of the salary of the employee in the previous year, shall be allowed as a deduction to the employer.

2. It is proposed to amend clause (iva) of sub-section (1) of section 36 of the Act, to increase the amount of employer contribution allowed as deduction to the employer, from the extent of 10% to the extent of 14% of the salary of the employee in the previous year.

3. Section 80CCD deals with deduction in respect of contribution to pension scheme of Central Government. Sub-section (2) of section 80CCD states that any contribution by the Central Government or State Government or any other employer to the account of an employee referred to in sub-section (1), shall be allowed as a deduction as does not exceed ––

(a) 14% (where such contribution is made by the Central Government or State Government); and

(b) 10% (where such contribution is made by any other employer) of the employees’ salary in previous year.

4. It is proposed to amend sub-section (2) of section 80CCD of the Act, to provide that where such contribution has been made by any other employer (not being Central Government or State Government), the employee shall be allowed as a deduction an amount not exceeding 14% of the employee’s salary. This is being increased only in the case where the employee’s salary is chargeable to tax under sub-section (1A) of section 115BAC of the Act.

5. The amendments will take from the 1st day of April, 2025 and will accordingly apply from assessment year 2025-2026 onwards.

[Clauses 12 & 25]

Full Text:

Union Budget 2024-25 (Full) + FINANCE (No.2) Bill, 2024

Dated: 24-7-2024