Contribution to an Approved Pension Fund

(1) An eligible person as defined in sub-section (19A) of section 2 deriving income chargeable to tax under the head Salary or the head Income from Business shall be entitled to a tax credit for a tax year in respect of any contribution or premium paid in the year by the person in approved pension fund under the Voluntary Pension System Rules, 2005.
(b)
(2) The amount of a person’s tax credit allowed under sub-section (1) for a tax year shall be computed according to the following formula, namely: — (A/B) x C Where.- A is the amount of tax assessed to the person for the tax year, before allowance of any tax credit under this Part; B is the person’s taxable income for the tax year; and C is the lesser of —
(i) the total contribution or premium referred to in sub-section (1) paid by the person in the year; or (ii) twenty per cent of the eligible person’s taxable income for the relevant tax year;
Provided that an eligible person joining the pension fund at the age of forty-one years or above, during the first ten years starting from July 1, 2006 shall be allowed additional contribution of 2% per annum for each year of age exceeding forty years.
Provided further that the total contribution allowed to such person shall not exceed 50% of the total taxable income of the preceding year :
Provided also that the additional contribution of two percent per annum for each year of age exceeding forty years shall be allowed up to the 30 June, 2019 subject to the condition that the total contribution allowed to such person shall not exceed thirty percent of the total taxable income of the preceding year.
(3) 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.