Contribution to an Approved Pension Fund (Section 63)

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This blog is in continuation to the series "Curtailing the Tax Liability (Part II) - Tax Credits".




Disclaimer: This blog will be updated over the period of time with practical examples, sample letters and relevant case laws and due to the volatility of tax statutes it is subject to unprecedented changes as and when required.



Contribution to an Approved Pension Fund (Section 63)



Any eligible person [Section 2(9)(A)] holding NTN/CNIC/NICOP deriving income from Salary/Business shall be entitled to tax credit in respect of contribution/premium paid in approved pension fund under Voluntary Pension System Rules, 2005. 


Computation 


Tax Credit = (A / B) X C 



A = Tax assessed before any tax credit (under this part) 

B = Taxable Income for the year 

C = Lesser of following: 

- Total Contribution or Premium 

- 20% of taxable income; Provided that person joining the pension fund at the age of 41 years or above, during the first 10 years starting from July1, 2006 shall be allowed additional contribution of 2% per annum for each year of age exceeding 40 years upto 30th June 2019 and that total contribution allowed to such person shall not exceed 30% of the total taxable income of the preceding year. 

Provided further that the total contribution allowed to such person shall not exceed 50% of the total taxable income of the preceding year 

The transfer by the members of approved employment pension or annuity scheme or approved occupational saving scheme of their existing balance to their individual pension accounts maintained with one or more pension fund managers shall not qualify for tax credit under this section 




NOTE: In addition to above please click here to read Miscellaneous Provision of Tax Credit (Section 65);


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