Income Tax

Section 80CCC of The Income Tax Act and Its Deductions

In order to motivate the assessee to save their hard-earned money and invest it wisely, many deductions have been offered by the Government under income tax. These deductions facilitate tax savings for an assessee. One such deduction that has been offered is the deduction u/s 80CCC of the Income Tax Act. This article discusses Section 80CCC of the Income Tax Act and its deductions.

Section 80CCC of The Income Tax Act
Section 80CCC of The Income Tax Act and Its Deductions

Also discussed here are the Frequently Asked Questions on Section 80CCC of the Income Tax Act 

  1. Who is eligible to claim deduction u/s 80CCC?

Before you move to the provisions of section 80CCC, it is crucial to know the class of persons who are eligible to claim deduction under this section 80CCC. The section 80CCC deduction is available to a person who has paid or deposited any sum of money, out of the income that is taxed, towards either the renewal of or new purchase of a particular annuity plan or pension funds.

2. The derived conclusion pertaining to deduction under section 80CCC 

Deduction under section 80CCC is applicable to a person inclusive of both resident individuals and a non-resident individual.

3. Deduction under section 80CCC is not applicable to a Hindu Undivided Family (HUF).

Section 80CCC of The Income Tax Act

Deduction under section 80CCC is permitted only if the sum of money is paid or deposited out of income that is liable to tax i.e. the sum of money paid or deposited out of any exempted income is not permitted.

4. What is the amount eligible for deduction under Section 80CCC?

The entire sum of money that has been paid or deposited either towards the renewal or new purchase of a particular annuity plan or a pension fund is permitted as a deduction. But, any amount of bonus or interest credited or accrued is not permitted as a deduction.

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5. Points to be considered while claiming deduction u/s 80CCC

The deduction under section 80CCC is allowed only towards those pension funds that are mentioned under section 10 (23AAB).

Contribution to an annuity plan that is provided by the Life Insurance Corporation of India (LIC) or any insurer under a pension scheme is covered by the Section 10(23AAB) of the Income Tax Act. However, the approval of the Insurance Regulatory and Development Authority of India (IRDAI) is mandatory for these pension schemes.

The deduction amount u/s 80CCC must not surpass the net taxable income.

6. What are the consequences on withdrawing the amount?

The individual assessee or nominee of the assessee can receive the amount that has been permitted as a deduction u/s 80CCC in the manner mentioned below:

They can receive the sum of money by way of surrendering the annuity plan; or

They can receive the amount as a pension.

When the amount is received either by the individual assessee or their nominee, the amount will be deemed to be the income of either the individual assessee or their nominee and will be liable to tax in the previous year during which the amount has been received.

The Collective maximum allowable deduction:

The collective maximum deduction that is available u/s 80C, 80CCC and 80CCD (1) has been restricted by the provisions of section 80CCE of the IT Act to INR 1.50 Lakhs. This means that u/s 80C, 80CCC, and 80CCD (1) the total deduction cannot exceed INR 1.50 Lakhs.

Frequently Asked Questions (FAQs)

  1. What is section 80CCC?

Any sum of money that is either paid or deposited to any annuity plan of LIC (Life Insurance Corporation of India) or any registered insurer for the sole purpose of getting a pension from the particular fund is permitted as a deduction u/s 80CCC.

  1. Is there a difference between Section 80C and Section 80CCC?

The main difference between section 80C and 80CCC is that u/s 80C the sum of money can be paid out of the income which is not chargeable to tax, but, u/s 80CCC the sum of money has to be paid solely out of the income that is chargeable to tax.

  1. Is deduction u/s 80CCC available post exhausting the deduction limit u/s 80C?

No. Total deduction u/s 80C, 80CCC and 80CCD (1) must not exceed INR 1.50 Lakhs.

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