Can I Claim Both 80C and 80CCD Deductions Under Income Tax?
- Rajesh Kumar Kar
- Apr 14
- 9 min read
Taxpayers can legally reduce their taxable income by claiming deductions under both Section 80C and Section 80CCD of the Income Tax Act. While these provisions often overlap, especially through investments like the National Pension System (NPS), each section has its own set of rules, limits, and opportunities.
Section 80C covers a wide range of investments with a cap of ₹1.5 lakh, while Section 80CCD includes additional benefits through subsections like 80CCD(1B) and 80CCD(2), offering extra deductions beyond the ₹1.5 lakh limit. Understanding where these deductions merge, and where they don’t, is key to optimizing tax savings without breaching compliance limits.
Table of Contents
Can You Claim Both 80C and 80CCD Deductions?
Yes, both deductions can be claimed simultaneously, provided they fall within the permissible limits and categories under the Income Tax Act. Section 80C includes various traditional investment options like PPF, EPF, ELSS, and life insurance premiums. Section 80CCD, on the other hand, is specifically designed to encourage retirement savings through the National Pension System (NPS) and Atal Pension Yojana (APY).
The critical distinction lies in their limits. Section 80C, 80CCC, and 80CCD(1) combined are capped at ₹1.5 lakh. However, Section 80CCD(1B) allows an additional ₹50,000 deduction exclusively for NPS contributions. Employer contributions under Section 80CCD(2) are over and above these, making them a separate deduction opportunity altogether. By planning investments across these subsections, taxpayers can expand their total deductions beyond ₹2 lakh per year without any overlap.
How Section 80C Works in Old Tax Regime
Under the old tax regime, Section 80C offers a maximum deduction of ₹1.5 lakh for eligible investments and expenses. This section is one of the most commonly used tax-saving provisions and applies to individuals and Hindu Undivided Families (HUFs). It covers a diverse basket of financial instruments, allowing flexibility in how the deduction is utilized.
Common eligible options include:
Employee Provident Fund (EPF)
Public Provident Fund (PPF)
Life insurance premiums
Equity Linked Savings Schemes (ELSS)
National Savings Certificate (NSC)
Tuition fees for up to two children
Principal repayment on home loans
Five-year fixed deposits with banks or post offices
This deduction is not available under the new tax regime. Therefore, those opting for the old regime can continue to benefit from Section 80C by aligning their investment strategy accordingly.
What Is Section 80CCD and How Is It Structured?
Section 80CCD deals exclusively with contributions made toward the National Pension System (NPS) and the Atal Pension Yojana (APY). It is divided into three parts, each with distinct rules and deduction limits:
Section 80CCD(1): Covers individual contributions to NPS or APY. For salaried employees, the deduction is limited to 10% of their salary (basic + DA), while self-employed individuals can claim up to 20% of their gross total income. This subsection is included within the overall ₹1.5 lakh cap under Section 80CCE.
Section 80CCD(1B): Introduced to provide an incentive for deeper pension savings, this allows an additional deduction of up to ₹50,000 for voluntary contributions to NPS. It is available over and above the ₹1.5 lakh limit and applies only to individual contributions, not employer ones.
Section 80CCD(2): Pertains to contributions made by an employer toward an employee’s NPS account. The deduction is allowed up to 10% of salary (14% for central government employees) and is not included in the ₹1.5 lakh ceiling. This makes it a powerful, tax-efficient tool, particularly for salaried taxpayers.
Together, these subsections create an opportunity to claim up to ₹2 lakh or more in deductions by carefully structuring both individual and employer contributions under the right categories.
Is Section 80C or 80CCD Allowed in the New Tax Regime?
The new tax regime, introduced under Section 115BAC, offers lower tax rates but removes the option to claim most deductions and exemptions. This includes deductions under Section 80C and Section 80CCD(1).
Only employer contributions under Section 80CCD(2) are allowed in the new regime. All personal contributions, whether under 80C, 80CCD(1), or 80CCD(1B), are disallowed if the new regime is selected.
Choosing between the regimes requires evaluating whether the benefit of lower tax rates outweighs the total deductions that can be claimed under the old regime. For taxpayers who make significant contributions to NPS or other eligible instruments, the old regime often proves more beneficial.
Claiming Deductions Under 80C and 80CCD(1): Combined Limits
Sections 80C and 80CCD(1) both fall under the overall ceiling defined in Section 80CCE, which caps the deduction at ₹1.5 lakh per financial year. This means that contributions made under 80CCD(1), typically towards NPS or Atal Pension Yojana, will eat into the same limit as investments made under Section 80C.
For example, if ₹80,000 is claimed under Section 80C for life insurance premiums and PPF contributions, only ₹70,000 more can be claimed under 80CCD(1). Any contributions beyond this amount are not eligible unless claimed under a different subsection, like 80CCD(1B), which offers additional benefits.
What Is 80CCD(1B) and How to Use It Beyond ₹1.5 Lakh?
Section 80CCD(1B) was introduced to encourage voluntary contributions to the National Pension System beyond the existing ₹1.5 lakh limit under Section 80CCE. It provides an exclusive additional deduction of up to ₹50,000 for individual contributions to NPS.
This deduction is over and above the ₹1.5 lakh combined cap for 80C and 80CCD(1), effectively increasing the total claimable amount to ₹2 lakh per year when utilized fully.
To qualify, the contribution must be made by the individual (not the employer), and it should be over and above the regular 80C and 80CCD(1) contributions. It's one of the most effective tools for increasing tax savings while also building a long-term retirement corpus through NPS.
How Employer Contributions Under 80CCD(2) Provide Extra Tax Savings
Section 80CCD(2) applies exclusively to employer contributions made to the employee’s NPS account. Unlike individual contributions, this benefit is over and above the ₹1.5 lakh limit under Section 80C and 80CCD(1).
For private sector employees, the deduction is allowed up to 10% of salary (basic + DA). For central and state government employees, the limit increases to 14%. This deduction is not restricted by Section 80CCE and can be claimed in full, provided it stays within the prescribed percentage limits.
Employer contributions directly reduce the taxable salary income without impacting any other exemption or deduction. This makes 80CCD(2) one of the most tax-efficient instruments available under the old regime. It is not available if the taxpayer opts for the new tax regime.
Can NPS Be Claimed Under Both 80C and 80CCD?
Yes, investments in the National Pension System (NPS) can be split across both Section 80C and Section 80CCD, depending on how and how much is invested.
The portion of NPS contributions made by the individual can fall under:
80C (if explicitly included by the taxpayer, within the ₹1.5 lakh limit)
80CCD(1) (subject to 10% of salary or 20% of gross income, included in the same ₹1.5 lakh cap)
80CCD(1B) (an additional deduction up to ₹50,000, separate from the ₹1.5 lakh ceiling)
This means the same NPS investment can be strategically split to maximize total deductions, without duplication. Employer contributions, if any, are separately claimable under 80CCD(2).
However, all these deductions are permitted only under the old tax regime. The new regime does not allow them.
Can NRIs Claim Deductions Under 80C and 80CCD?
Non-Resident Indians (NRIs) are eligible to claim deductions under both Section 80C and Section 80CCD, subject to certain conditions.
For Section 80C, eligible instruments include:
Life insurance premiums
Principal repayment of home loans
ELSS mutual funds
Tuition fees for children
ULIPs
For Section 80CCD, NRIs can invest in NPS and claim deductions under:
80CCD(1): Within the overall ₹1.5 lakh limit
80CCD(1B): An additional ₹50,000 over and above the main cap
Employer contributions under 80CCD(2) are not applicable unless the NRI is employed with an Indian entity that contributes to NPS on their behalf. Also, these deductions are not available under the new tax regime and must be claimed under the old one.
Are APY Contributions Eligible Under 80CCD?
Yes, contributions to the Atal Pension Yojana (APY) are eligible for deduction under Section 80CCD(1) of the Income Tax Act. This section covers individual contributions made towards notified pension schemes, and APY falls under that umbrella. The maximum limit for deduction under 80CCD(1) is subject to the overall ₹1.5 lakh cap shared with Sections 80C and 80CCC.
The deduction is available to any individual who subscribes to APY, regardless of whether they are salaried or self-employed. However, to claim the benefit, contributions must be made from taxable income and recorded within the relevant financial year. It’s also important to note that APY contributions do not qualify for the additional ₹50,000 deduction under 80CCD(1B); that benefit is reserved exclusively for NPS.
Recent Changes in 80C and 80CCD You Should Know
Recent policy changes and Budget updates have made it even more crucial to understand how 80C and 80CCD deductions operate:
Budget 2023 and 2024-25 Updates: While no direct changes were made to 80C or 80CCD limits. The emphasis on the new tax regime, which disallows these deductions, has shifted focus. Taxpayers must now actively opt for the old regime to continue availing these benefits.
Employer Contributions to NPS: For central government employees, the deduction under 80CCD(2) has been extended to 14% of salary, up from the earlier 10%, aligning it with private sector norms in some cases. This change enhances the deduction limit available under 80CCD(2), provided it is claimed correctly.
Digital Declaration and Pre-filled ITRs: With the introduction of automated pre-filled returns, employers’ NPS contributions and other deductions are now auto-populated. However, taxpayers must still review these entries to avoid missed claims or duplication.
Conclusion
Combining deductions under Section 80C and Section 80CCD offers one of the most effective strategies for reducing taxable income—provided the limits are respected and the structure of each subsection is clearly understood. APY contributions, NPS limits, employer inputs, and optional enhancements like 80CCD(1B) all form a coordinated framework for tax savings under the old regime. With recent updates and the shift toward simplified tax regimes, informed decision-making around deduction eligibility is more important than ever.
FAQs
What is the maximum deduction allowed if I combine 80C and 80CCD?
The maximum deduction under Section 80C, 80CCC, and 80CCD(1) combined is capped at ₹1.5 lakh. In addition, Section 80CCD(1B) allows an extra deduction of ₹50,000 for voluntary NPS contributions. Employer contributions under 80CCD(2) are excluded from this limit and can be claimed separately.
Can I split my NPS investment between 80C, 80CCD(1), and 80CCD(1B)?
Yes. A portion of your NPS contribution may qualify under 80C or 80CCD(1), subject to the ₹1.5 lakh combined limit, while any excess (up to ₹50,000) can be claimed under 80CCD(1B). This allows strategic allocation across all three.
Is 80CCD(2) deduction available for self-employed individuals?
No. Section 80CCD(2) applies only to salaried employees receiving employer contributions to NPS. Self-employed individuals cannot claim deductions under this subsection.
Are deductions under 80C and 80CCD available in both tax regimes?
No. These deductions are available only under the old tax regime. The new regime offers lower slab rates but does not permit claims under 80C, 80CCD(1), or 80CCD(1B), except in specific employer-driven cases under 80CCD(2).
How do I report 80CCD(2) contributions from my employer?
Employer contributions eligible under 80CCD(2) should be declared in the salary breakdown. They must be shown under the "Deductions" section while filing ITR, ensuring correct classification as employer contributions.
Can I claim 80C deductions for my child’s tuition and 80CCD for NPS in the same year?
Yes. Tuition fees for children can be claimed under 80C, and contributions to NPS under 80CCD(1) or 80CCD(1B), subject to their respective limits. Both can be availed in the same financial year.
Are life insurance and NPS investments considered separately for deductions?
They fall under different categories but may compete for the ₹1.5 lakh limit under Section 80CCE. Life insurance premiums are covered under 80C, while NPS contributions fall under 80CCD(1) and optionally under 80CCD(1B).
What if my 80C investments exceed ₹1.5 lakh without NPS?
Any amount above ₹1.5 lakh under 80C won't fetch additional tax benefits. However, contributing to NPS allows an additional ₹50,000 deduction under 80CCD(1B), over and above the 80C limit.
Is there a penalty for claiming both 80C and 80CCD incorrectly?
Yes. Incorrect claims can lead to disallowance during assessment, resulting in demand notices, penalties, or interest. Ensure proper segregation and accurate reporting to avoid compliance issues.
How to check if my employer’s NPS contribution qualifies under 80CCD(2)?
Confirm if your employer contributes to your NPS Tier-I account. The eligible amount should be mentioned in Form 16 or payslip. It must not exceed 10% of basic salary + DA (14% for government employees).
Are Atal Pension Yojana (APY) deductions treated the same as NPS?
Yes. Contributions to APY are eligible under Section 80CCD(1), subject to the same limits as NPS. APY does not qualify for 80CCD(1B) or 80CCD(2) deductions.
If I switch to the new tax regime mid-year, will I lose 80C and 80CCD benefits?
Yes. Once the new regime is opted, deductions under 80C and 80CCD(1)/(1B) are not allowed. Only 80CCD(2), if applicable, may be available, depending on employer structure and the regime switch mechanism.
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