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From a very young age, we are taught about the importance of planning and investing in our future. As we grow and start earning, we begin the hunt for different policies available that can help us make our retirement years peaceful and stress-free. Investing in such plans becomes even more fruitful when we get benefits from them not only in the future but also in the present.
When we think of any term insurance policy or retirement plan, tax benefits always prove to be one of the most valued benefits offered. No discussion about tax saving policies in India can be complete without the mention of Section 80CCC of the Income Tax Act, 1961. This section is read along with Section 80C and Section 80CCD(1) to determine the total exemption value.
Answering what is 80CCC in Income Tax Act can be quite daunting for those not well-versed with its nitty-gritties. To put it rather simply, section 80CCC of 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 our current income on the purchase or the renewal of the policy in the applicable financial year. However, we cannot claim deductions under 80ccc in the years we do not pay for the contribution into the policy. In other words, we can only claim the deduction as long as we are actively paying for the fund and not the entire duration of their coverage.
There are certain criteria for the fund, which include:
Depending on the payment plan we choose, payment can be made either annually or all at once, and this expenditure is usually from our taxable income. The provisions under the Section 80CCC of the Income Tax Act is what allows us to claim deduction on this tax and get what is commonly called the tax rebate. It is important to note that the pension, annuity, any bonuses or interests are still taxable and cannot be claimed for deduction.
The maximum deduction under 80CCC Income Tax Act is Rs.1,50,000. As already mentioned, this section is read along with two other sections 80C and 80CCD, accounting for the total deduction.
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. All you should do is keep track of the amount paid towards your annuity to claim a deduction under this section.