Section 80ccc Of The Income Tax Act

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

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.

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