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Income tax department had earlier issued the Circular No: 1/2010 dated 11.1.2010 meant for deduction of tax at source for salaried class. However, it had lead to various doubts, especially the treatment under Section 80 CCD relating to Contribution made by employer for pension fund such as New Pension Scheme (NPS).
Now, Income tax department has come up with a clarificatory circular that settles the said doubt.
In the Circular No: F.No. 275/192/2009-IT (B) New Delhi Dated the 9th February, 2010, tax men have clarfied that, where the Central Government or any other employer makes any contribution to the account of employee for the pension scheme, the employee shall also be allowed a deduction in the computation of his total income of the whole of the amount contributed by the Central Govt. or any other employer as does not exceed 10% of his salary in the previous year.
It was also clarified that this deduction is in addition to deduction in respect of contribution made by an individual in the previous year to his account under a pension scheme notified, to the maximum of 10% of his salary.