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 - Finance Bill

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