Interested in financial products
CreditMantri
Processing

Section 80CCC Of The Income Tax Act

Section 80CCC of the Income Tax Act enables people with income tax deductions for contributions made by them towards particular pension funds from life insurance. The deduction is within Section 80C

Section 80CCC of the Income Tax Act of 1961 allows tax deductions on annuity plans from the Life Insurance Corporation of India (LIC) and other insurers. The maximum amount of deduction under Section 80CCC of the income tax act is Rs. 1.5 Lakhs.

What Is Section 80CCC?

The Section 80CCC deduction limit includes the expenditure on the purchase of a new policy or payments made towards the renewal or continuance of an existing policy. The compulsory condition for this deduction is that the policy on which the money is spent must provide a pension or periodical annuity.

The primary condition for availing of this deduction is that the policy for which the money has been spent must be providing a pension or a periodical annuity.

Terms And Conditions of Section 80CCC

All taxpayers are not eligible to claim an deduction under Section 80CCC of the Income Tax Act of India, 1961. Here are some of the terms and conditions that must be satisfied to avail deduction.

  • The deduction benefit can be availed only by individual taxpayers. Associations, companies, partnerships, sole proprietorships, or Hindu Undivided Families (HUFs) who do not come across as individual taxpayers do not qualify for the deductions.
  • NRIs can also claim these deductions only if they are individual taxpayers.
  • To qualify for a Section 80CCC deduction, your investment should only be done in a pension plan that pays annuities on maturity.
  • The amount that is claimed as deduction must not exceed the net taxable income of the individual taxpayer.
  • This deduction can be claimed while filing IT returns for the financial year.
  • This deduction can only be claimed for the financial year in which the money is paid towards the investment.
  • The pension plan bought from the insurance company must be approved by the Insurance Regulatory and Development Authority of India (IRDAI) to claim tax deduction under Section 80CCC.
  • You will not be allowed to claim a tax deduction if you close the annuity plan completely or partially.
  • You will not be eligible for a tax deduction if you receive a pension from such a plan.

What Is The Deduction Limit Under Section 80CCC?

  • The deduction benefit allowed under section 80CCC of the income tax act is Rs. 1.5 Lakhs.
  • The deduction limit is in union with Section 80C and Section 80CCD (1).
  • The total investment in these 3 sections- 80C, 80CCD(1), and 80CCC should not surpass Rs.1.5 Lakhs. For example: Say, you have invested Rs. 1 Lakh in an ELSS mutual fund plan and Rs. 1 Lakh under a pension annuity plan. ELSS mutual fund plan gets a deduction under Section 80C whereas the annuity plan gets a deduction under Section 80CCC. The sum of tax deduction allowed on these two sections will be Rs. 1.5 Lakhs. It will be counted together as one and not Rs. 1.5 Lakhs in each section. Therefore, your highest tax deduction limit under Sections 80C, 80CCD(1), and 80CCC altogether will be 1.5 Lakhs.

Section 80C

Section 80C enables a decrease in taxable income by making tax-saving deposits or incurring eligible expenses.

  • The maximum deduction allowed is Rs. 1.5 Lakhs every year from the taxpayer’s total income.
  • This deduction can be utilized by individuals and HUFs.
  • Companies, partnership firms, and LLPs cannot make use of the benefit of this deduction.
  • Section 80C encompasses subsections, 80CCC, 80CCD (1) , 80CCD (1b) and 80CCD (2).
  • It is essential to note that the overall limit including the subsections for claiming the deduction is Rs. 1.5 Lakhs except for an additional deduction of Rs 50,000 allowed u/s 80CCD(1b)

Section 80CCC – Pension Contribution Insurance Premium /Section 80CCD

Eligible investments for tax deductions
80 C

80C enables deduction benefit for the investment made in the following:

  • PPF
  • EPF
  • LIC premium
  • Equity-linked saving scheme
  • Principal amount paid towards the home loan
  • stamp duty and registration charges for the procurement of property
  • Sukanya Smriddhi Yojana (SSY)
  • National saving certificate (NSC)
  • Senior citizen savings scheme (SCSS)
  • ULIP
  • Tax saving FD for 5 years
  • Infrastructure bonds, and so on.
80CCC Deduction for life insurance annuity plan.

80CCC enables deduction benefit for payment made towards:

  • annuity pension plans
  • pension obtained from the annuity or
  • the amount received upon surrender of the annuity, including interest or bonus accrued on the annuity

All these are taxable in the year of receipt.

80CCD (1) Deduction for NPS

Employee’s contribution under section 80CCD (1). The maximum deduction is capped at the lowest amount among the following

  • 10% of salary (If the taxpayer is an employee)
  • 20 & of gross total income (For the self-employed)
  • Rs 1.5 Lakh ( limit allowed under section 80C)
80CCD (1b) Deduction for NPSAdditional deduction of Rs 50,000 is permitted for the amount deposited to NPS account Contributions to Atal Pension Yojana is also entitled for deduction.
80CCD (2) Deduction for NPSEmployers contribution is allowed for deduction up to 10% of the sum of basic salary and dearness allowance under this section. Only salaried individuals are allowed for benefit under this section and not self-employed individuals.

Provisions of Section 10 (23AAB)

The provisions under Section 10 (23AAB) are inherently associated with Section 80CCC. It is according to the income incurred from a fund that has been set up by a reputed insurer, including the LIC.

The fund must have been established before August 1996 as a pension scheme. The contributions done by the taxpayer to the policy should be for earning pension income in the future.

Who Are All Eligible for Deduction Under Section 80CCC?

The eligibility criteria for deductions are:

  • An individual taxpayer who has signed to an annuity plan which has been provided by an approved insurance company.
  • HUF or Hindu Undivided Family is not allowed exemption under Section 80CCC.
  • These provisions are allowed for both residents as well as non-resident Indians.

Differences Between Section 80C And 80CCC

There are two important differences between Section 80C and Section 80CCC. They are:

  • The claimed deduction amount can also be obtained from the part of the income that is not taxable. However, as per Section 80CCC of the Income Tax Act, it is compulsory that the payment done towards the pension fund must be made from the taxable income to get the tax benefits.
  • Another important difference between Section 80C and 80CCC is that 80C has various tax deductions but 80CC is unique to a pension fund or annuity contributions.

Tax Procedure on Getting Back The Invested Funds

The amount invested in the pension fund is obtained back by the taxpayer after a certain time as monthly pension. If the taxpayer surrenders the policy, the amount invested by him would also be given back with interest. When the policy is surrendered by the taxpayer or the nominee, the amount which has previously been claimed as a deduction under Section 80CCC would be taxable at the time of receipt according to the income tax slabs of the taxpayer for the year in which the amount is recieved. The same applies to the amount which is received as annuity.

Conclusion

Section 80CCC of the Income Tax Act was introduced to encourage taxpayers to deposit in pension funds and secure their future financially. It is not only accessible to Indian residents but also to non resident individuals contributing to pension funds. It is very useful and safeguards your future financially.

FAQS

1. What deductions can be availed under 80CCC?

80CCC enables deduction for contributions made towards:

  • annuity pension plans
  • pension obtained from the annuity or
  • amount received upon surrender of the annuity.

This includes interest or bonus accrued on the annuity Contributions made to Atal Pension Yojana are also eligible for deduction.

2. What is the difference between 80C and 80CCC?

Under Section 80C, the amount to be paid may come from income that is not chargeable to tax. However, under Section 80CCC, the funds should be paid out of the income that is chargeable to tax.

3. Does PF come under 80CCC?

Employees' contribution to the EPF qualifies for deduction under Section 80C. Employer's contribution is not subject to tax, however it is not eligible for deduction under Section 80C.

4. Does 80C apply to senior citizens?

Senior citizens can also utilize tax benefit under Section 80C on the deposit, but interest is taxable based on the eligible tax bracket. This scheme is given by the Indian Postal Service.

5. Is 80D included in 1.5 lakh?

Section 80C allows deductions up to Rs. 1.5 lakhs annually while Section 80D provides deductions up to Rs. 65000 subject to conditions.

6. Does 80CCD (1b) form a part of 80C?

80CCD (1b): is an additional deduction, and it is capped at Rs. 50,000 which is over and above section 80C.

×Thank you! Your comment will be reviewed and posted shortly.

CreditMantri will never ask you to make a payment anywhere outside the secure CreditMantri website. DO NOT make payment to any other bank account or wallet or divulge your bank/card details to fraudsters and imposters claiming to be operating on our behalf.