Section 80CCC of the Income Tax

Section 80CCC, part of the broader 80C category in the Income Tax Act 1961, allows for a tax deduction of up to Rs. 1.5 lakh annually for investments in specific pension funds outlined under Section 10 (23AAB). Contributions to approved pension plans, such as those offered by Life Insurance Corporation or authorized Indian insurers, qualify for these deductions, while pension funds from mutual funds do not offer tax benefits under this section.

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What is Section 80CCC?

Section 80CCC is a provision within the Income Tax Act of 1961 that allows you to claim tax deductions for contributions made towards specific pension plans. It falls under the umbrella of Section 80C, which offers a total deduction limit of Rs. 1.5 lakh per year for various investments that promote savings and retirement planning.

Here's what the Section 80CCC pension plan offers:

  • Tax deduction for pension contributions: You can claim tax deductions for the amount you invest in designated pension plans.

  • Eligibility is limited to specific plans: Not all pension plans qualify. Only those that meet the criteria set out in Section 10 (23AAB) of the Act are eligible.

What is Section 10 (23AAB)?

Section 10(23AAB) of the Income Tax Act, 1961, works in conjunction with Section 80CCC of the Income Tax Act, 1961. It clarifies the tax treatment for contributions made towards specific pension plans in India.

Here's what Section 10(23AAB) offers to the best investment plans:

  • Eligible Funds: The contributions must be made to a pension scheme set up by a recognized insurer, like LIC, before August 1, 1996.

  • Tax Deduction: The section allows for tax deductions on the contributions you make towards these pension plans. This deduction is incorporated under Section 80CCC pension scheme.

  • Intention for Pension: The contributions you make need to be with the intention of receiving a pension in the future.

Eligibility for Deduction Under Section 80CCC

  • Annuity Plan Subscriber: Under the 80CCC pension scheme, you must be an individual taxpayer who has subscribed to an annuity plan. This plan should be offered by an insurance company that is approved by the government.

  • HUF Not Eligible: Hindu Undivided Families (HUF) are not eligible for tax deductions under Section 80CCC.

  • Resident or Non-Resident: These provisions apply to both resident and non-resident taxpayers in India.

Claim Limit of Section 80CCD

  • Claim limit under Section 80CCC pension scheme is Rs 1.5 lakh.

  • This limit is clubbed with Section 80C and 80CCD(1).

  • The total deduction limit for these three sections together is Rs 1.5 lakh.

Invest & Save upto ₹46,800 per annum in taxInvest & Save upto ₹46,800 per annum in tax

Terms and Conditions of Section 80CCC

  • Eligibility: Applies to individuals who pay for a qualifying life insurance policy with their taxable income.

  • Policy payout: Must comply with Section 10(23AAB) for payments from accumulated funds.

  • Bonuses and interest: Not deductible under Section 80CCC pension plan.

  • Maturity benefits: Monthly pension or any amount received is taxable.

  • Surrendered policy: The amount received is taxable.

What is the Difference Between Section 80C and 80CCC?

  • Section 80C allows deductions from income that may not be taxable, whereas Section 80CCC requires payments from taxable income.

  • Investments in policies from LIC, PPF, Mediclaim, or other insurance companies qualify for deductions under both sections, leading to potential tax refunds.

  • Deductions under Section 80CCC are available to Indian residents and non-residents but not to Hindu Undivided Families.

  • Once the maximum of Rs. 1.5 lakhs under Sections 80C, 80CCC, and 80CCD is exhausted, no further deductions can be claimed.

  • Surrendering a policy may lead to taxation of the surrendered amount.

Important Points to Consider for 80CCC

  • Deduction limits under pension fund 80CCC are combined with Sections 80C and 80CCD (1) to determine the total deduction limit available.

  • Section 80CCC pension plan scheme applies specifically to insurance providers in India offering annuity or pension plans, whether public or private entities.

  • Deductions apply to premiums or sums paid for the preceding Assessment Year only, not for payments made in advance.

  • The maximum deduction available under Section 80CCC is Rs. 1,50,000 per annum.

  • Keeping records of transactions for insurance policy payments is crucial to claim this exemption.

  • Exemption limits cannot exceed an individual's income, and other provisions in the Income Tax Act also aid in reducing taxation liability.

Tax Process to Get Back Invested Funds

Below is the tax-saving process to get back your invested funds:

  • Tax-Deferred Growth: The sum invested in the pension fund grows tax-deferred until withdrawal. This means you don't pay taxes on the earnings while the money remains invested.

  • Tax on Surrender: If you surrender the policy before the maturity period, the previously claimed tax deductions become taxable as income. This applies to both the principal amount (invested sum) and any interest earned.

  • Tax on Annuity: Similar to surrender, any amount received as a monthly pension (annuity) after maturity is taxed as income according to your tax slab for that year.

FAQs

  • Can non-resident Indians (NRIs) avail of deductions under section 80CCC?

    Yes, NRIs can claim this deduction provided they contribute to pension funds specified under Section 10 (23AAB).
  • Are annuity plan payouts exempt from taxation?

    No, these receipts, including bonuses or interest, are taxable in the year they are received.
  • Can deductions be claimed under sections 80C and 80CCC together?

    The deduction under 80CCC is included in the overall deduction limit under section 80C. It is combined with deductions from 80C and 80CCD, allowing a total deduction of Rs. 1.5 lakh.
  • Is the 80CCC deduction applicable in the new tax regime?

    No, the 80CCC deduction is not applicable in the new tax regime.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
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