Section-80CCC

Section 80CCC Deduction

Section 80CCC Deduction

Section 80CCC is a section in the Income Tax Act which allows taxpayers who are earning pension income to claim certain deductions at the time of calculating the taxpayer’s taxable income. As a taxpayer in India, the primary advantage of claiming tax deductions under Sections such as 80C, 80CCD and 80CCC is that doing so will reduce an individual’s taxable income and the resulting tax liability. Section 80CCC of the Income Tax Act of 1961 provides tax deductions for contributing to specific pension funds. Section 80CCC came into effect from the 1st of April 1997.

The section provides tax deductions for contribution to certain pension funds. Under the section, a maximum deduction of INR 1.5 Lakhs shall be available for each year on the expenses incurred in buying a new policy that pays pension or a periodical annuity, or by renewing an existing policy. This section is available in addition to the deduction which is available under other sections such as the Section 80C and 80CCD(1). As a result, the maximum total deduction that can be availed by a taxpayer under all the three Sections (80C, 80CCC and 80CCD) is INR 1.5 Lakhs. In this article, we briefly discuss the important deductions available under Section 80CCC of the Act.

Eligibility

Any individual is eligible to avail these deductions under this section; yet, Hindu Unified Families cannot make use of this section. According to the Income Tax Department, an individual taxpayer is eligible to claim these tax deductions for contributing to certain pension funds of the LIC or any other insurance entities for up to INR 1,50,000 subject to the notified conditions. Further, the Central Board of Direct Taxes (CBDT) has mentioned that the aggregate amount of the deductions under Section 80C, Section 80CCC and Section 80CCD shall not exceed INR 1,50,000, even if the assessee is a senior citizen.

Key Features

  1. The plan must be related to receiving a pension from a fund that is stated in Section 10(23AAB). The amount for the policy must be paid out of the income chargeable to tax. It should be noted that deduction cannot exceed the taxable income.
  2. Bonuses or interests obtained from the policy are not eligible to be claimed as a tax deduction.
  3. The proceeds from this policy as a pension fund are liable for taxes they are considered as income of the previous year. This would also include any bonuses or interests if any are received.
  4. The amount obtained after the surrender of the annuity plan regardless of whether in whole or in parts are also chargeable to tax.
  5. The pension obtained from the annuity plan is also chargeable to tax.

Difference Between Sections 80C and 80CCC

  • The main difference between Section 80C and Section 80CCC of the Income Tax Act of 1961 is that under Section 80C, the amount to be paid may come from income that is not chargeable to tax. While under Section 80CCC the funds must be paid out the income that is chargeable to tax.
  • Individuals who have paid taxes in excess but have invested in policies from LIC, PPF, Mediclaim or other insurance companies may claim these deductions under the Section and receive a refund of excess taxes paid while filing Income Tax Returns.
  • Residents and Non- Residents of India may claim the deductions available under the Section 80CCC. However, under no circumstances, a Hindu Undivided Family is eligible for deductions under this Section.
  • An individual can not claim further deductions after exhausting the limit of INR 1.5 Lakhs under Section 80C, Section 80CCC and 80CCD(1).

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