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Income Tax Deduction Under Section 80CCC In India

Section 80CCC is an effective way to reduce the tax burden through retirement-focused plans. However, tracking annuity payments is essential for claiming deductions under this section.

  • 5,095 Views | Updated on: Jun 14, 2024

Section 80CCC of the Income Tax Act, 1961, is a tax-saving provision under the Income Tax Act 1961 that encourages individuals to invest in retirement planning. By contributing to designated pension plans, you can reduce your taxable income, thereby lowering your tax liability. Any resident individual paying income tax in India can claim this deduction if they contribute towards an eligible pension plan.

Tax exemptions are invariably sought after when exploring life insurance policies and retirement plans. Within the Indian tax laws, Section 80CCC of the Income Tax Act, 1961 acts as an important part of tax-saving strategies. This section, in conjunction with Sections 80C and 80CCD (1), collectively determines the maximum exempt income.

What is 80CCC of the Income Tax Act?

Section 80CCC of the Income Tax Act provides us with the opportunity to claim certain tax deductions on the money invested in a pension plan or a pension fund. These deductions can be claimed on your current income on the purchase or the renewal of the policy in the applicable financial year. However, you cannot claim deductions under 80CCC in the years you do not pay for the contribution to the policy.

What are the Terms and Conditions of Section 80CCC?

To avail of the benefits, it is important to look out for the terms and conditions associated with Section 80CCC:

  • Section 80CCC is applicable to individuals who have utilized their taxable income to pay premiums for the renewal or purchase of a life insurance policy.
  • Regarding Section 10 (23AAB), the disbursement of funds from the policy must be conducted using the accumulated funds.
  • Bonuses or accrued interest do not qualify for deductions under Section 80CCC.
  • Any monthly pension received from the policy is subject to taxation based on prevailing rates.
  • In the event of policy surrender, the surrendered amount is also subject to taxation.
  • Rebates previously available on annuity plan investments before April 2006 are not permissible under Section 88.
  • Amounts deposited prior to April 2006 do not qualify for deduction under this section.

Eligibility for Claiming Deduction under 80CCC

To qualify for the tax deduction offered by Section 80CCC of the Income Tax Act, 1961, individuals must meet the following criteria:

  • Resident Status: As per Section 80CCC of the Income Tax Act, 1961, Non-Resident Indians (NRIs) are also eligible for claiming tax deductions.
  • Taxable Income: Individuals must have taxable income to claim the deduction. The deduction can be used to offset this income, but it cannot be claimed if your income falls below the basic exemption limit.
  • Specified Pension Fund Contributions: The tax benefit applies only to contributions made to specific pension funds during the relevant financial year. These funds are notified by the government and typically offered by life insurance companies.
  • Source of Funds: The contribution towards the pension fund must be made from your taxable income and not from any other source.

How Much Amount Can You Claim Under Section 80CCC?

The maximum deduction is ₹1.5 lakh per year, but it is subject to the overall limit of ₹1.5 lakhs under Sections 80C, 80CCC, and 80CCD (1). You can claim the entire amount you contribute within the limit. However, you cannot claim a deduction:

  • If you contribute to a pension plan not notified under Section 10 (23AAB).
  • If you are a non-resident individual.
  • If your total contributions under Sections 80C, 80CCC, and 80CCD (1) exceed ₹1.5 lakh.

Also, the deduction is available for both new and existing pension plans as long as they meet the eligibility criteria. The premiums paid towards the life insurance component of the plan are not eligible for deduction under Section 80CCC. You need to submit proof of your contribution while filing your income tax return to claim the deduction.

What is the Relation Between Section 80CCC and Section 10 (23AAB)?

The relationship between Section 80CCC and Section 10 (23AAB) is crucial for claiming tax deductions on pension contributions in India. Let us take a look at how they work together:

Section 80CCC offers a tax deduction for your contributions towards specific pension plans. However, it does not specify which plans are eligible. Section 10 (23AAB) defines the specific pension plans that qualify for the deduction under Section 80CCC. These plans are typically offered by life insurance companies and adhere to certain conditions:

  • Established before August 1996: The pension scheme must have been established before this date.
  • Purpose-driven: The contributions must be directed towards receiving annuity income in the future.
  • Payment method: The pension payout must come from the accumulated funds, not interest or bonuses.

Section 80CCC tells you that you can get a tax benefit for contributing to certain pension plans

Section 10 (23AAB) tells you which specific pension plans qualify for that benefit. Essentially, you cannot claim the deduction under Section 80CCC without your chosen plan meeting the criteria set by Section 10 (23AAB).

Summing it Up

Income tax rebates have been made more accessible and easier with these provisions, which often act as incentives to those investing in various avenues. Section 80CCC is undoubtedly an effective way to reduce our tax burden by investing in a plan that provides financial security during retirement. You should keep track of the amount paid towards your annuity to claim a deduction under this section.

Key Takeaways

  • Section 80CCC offers a way to reduce tax burdens by investing in plans providing financial security during retirement.
  • Deductions can be claimed on the current income during the purchase or renewal of the policy in the applicable financial year.
  • Indian residents as well as the Non-Resident Indians are eligible to claim deductions under Section 80CCC.
  • The maximum deduction under Section 80CCC is ₹1.5 lakh per year, subject to the overall limit under Sections 80C, 80CCC, and 80CCD (1).

FAQs


1

Can NRIs claim deduction under section 80CCC?

No, NRIs cannot claim deductions under section 80CCC. However, there are specific conditions, such as contributions must be made to pension funds notified under Section 10 (23AAB).



2

Are the proceeds from annuity plans exempt from tax?

The proceeds from annuity plans are taxable. However, some exemptions depend on the type of annuity plan and the specific provisions. It is best to consult with a tax professional for specific details.



3

Can I claim deductions under sections 80C and 80CCC?

Yes, you can claim deductions under both sections 80C and 80CCC, up to a combined maximum of ₹1.5 lakh. However, remember that certain other sections like 80CCD (1B) allow additional deductions, raising the total potential to ₹2 lakh.



4

What comes under 80CCC in income tax?

Section 80CCC specifically covers contributions made towards certain notified pension funds, mainly NPS and APY, to encourage retirement savings.



5

What is the 80CCC limit for FY 2023 24?

The 80CCC deduction limit for FY 2023-24 is ₹1.5 lakh. However, this combined limit includes deductions under Section 80C as well.



6

What is the difference between 80CCD and 80CCC?

80CCD covers various contributions related to pension schemes, including employer contributions and self-employed individual contributions. While 80CCC is focused on individual contributions to notified pension funds like NPS and APY.



7

Is 80CCC part of 80C?

No, 80CCC is not part of 80C. They are separate sections offering deductions for different types of investments and contributions.



8

Does PPF come under 80CCC?

No, PPF does not come under 80CCC. It falls under Section 80C.



9

Is NPS under 80CCC?

No, the National Pension Scheme (NPS) is covered under section 80CCD, not 80CCC.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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