Section 80CCC in Income Tax

What exactly is Section 80CCC?

Individuals can claim tax deductions for donations to certain pension schemes under Section 80CCC of the Income Tax Act of 1961. This section allows for a tax deduction of up to Rs. 1,50,000 per year on costs paid in purchasing a new policy or continuing an existing plan that pays a pension or a periodic annuity (as defined in Section 10(23AAB)). The pension amount received, including any interest or bonus accrued on the annuity, is, nevertheless, taxable in the year of receipt. It is important to note that the deduction limit under Section 80CCC is combined with the limits under Sections 80C and 80CCD, resulting in a total tax deduction limit of Rs. 1,50,000.

Section 80CCC Terms and Conditions

     Taxpayers who have deposited a portion of their taxable income to purchase or renew an annuity plan from LIC or another insurer are eligible.

     According to Section 10, the policy should pay the pension from the accrued funds (23AAB).

     Interest or bonuses earned as a result of the policy are not tax deductible.

     In a fiscal year, the maximum permitted deduction is Rs.1 lakh. This maximum is set to be increased to Rs.1.5 lakhs beginning with the fiscal year 2016-17, i.e. on April 1, 2016.

     The proceeds from the policy as pension funds are taxed since they are considered income from the prior year. This includes any accrued interest and incentives.

     The surrender value of the annuity plan will be regarded as income and taxed appropriately.

     Section 88 prohibits rebates on investments in annuity programmes made prior to April 1, 2006.

     Section 80C deductions are likewise not applicable to sums deposited before to April 1, 2006.

Eligibility to Claim Deductions Under Section 80CCC

Individual taxpayers who have invested in an annuity plan offered by an insurer are eligible for the deductions described in this section.

This part does not apply to Hindu Unified Families (HUF). Furthermore, both residents and non-residents can claim the deductions under Section 80CCC.

Can NRIs claim the Section 80CCC deduction?

Yes, NRIs can deduct their income under Section 80CCC. However, under Section 10, claim deductions can only be made on contributions made to their pension funds (23AAB).

How many times may I take a deduction under Section 80CCC in a fiscal year? 

Section 80CCC deductions can only be claimed once per fiscal year.

What Are the Key Terms of Section 80CCC Pension Fund Deduction?

The following are the conditions that a taxpayer must meet in order to claim a deduction under Section 80CCC.

     Taxpayers who have contributed a set amount toward renewing or purchasing an insurance policy from LIC or another insurance company.

     Individuals are not permitted to claim exemptions for bonuses or interest earned from insurance.

     A policy’s proceeds are taxed.

     An annuity plan’s surrender value is recognised as income. This is taxable in either part or full.

     Deductions will be made on the amount paid in the preceding year.

     Individuals can claim a yearly deduction when the pension fund is paid all at once.

What is the maximum amount you can claim under Section 80CCC?

a)  Section 80CCC allows you to claim a maximum deduction of Rs 1.5 lakh.

b)  Section 80CCC deduction limit is combined with sections 80C and 80CCD. That is, bycombining all three portions, you can get the maximum deduction.

c)  Rs. 1.5 lakh = 80C+80CCC+80CCD (1)

When is it not possible to claim a deduction under Section 80CCC?

a) If you get any money for surrendering the policy, you must pay taxes on it based on thepreceding year.

b) If you received interest or a bonus from the policy, you are not eligible for a deduction for thatamount. Except for these bonuses, the deduction will be allowed.

c)  You cannot claim the deduction if you made contributions prior to 2006.