Section 80CCC of the Income Tax Act: Contribution to Pension Funds

What is Section 80CCC of the Income Tax?

Under section 80CCC, you can claim an income tax deduction for investments in certain specified pension funds. These funds include

• The annuity plans of LIC (Life Insurance Corporation of India) and
• Those specified under section 10 (23AAB) for the Income Tax Act.

Who can Claim the 80CCC Deduction?

To claim the income tax benefit under section 80CCC, you must

• Be an individual As per the provisions of section 80CCC, to claim a deduction, one must be an individual. It means that non-resident individuals (NRI) can also benefit from this section. Also, HUFs cannot claim exemption under section 80CCC.
• Have a taxable income You can claim the tax benefit only when you have taxable income, which can be adjusted against this deduction. If your income is below the basic exemption limit, there is no need to claim the deduction.
• Contribute to specified pension funds The tax benefit can be availed only if you invest the money in specified pension funds during the relevant financial year.
• Contribute out of taxable income This is one of the most important points to be considered while claiming a deduction under section 80CCC. The investment must be done out of your taxable income and not from any other source.

How to Claim Tax Benefit u/s 80CCC?

Once you have invested the funds u/s 80CCC, you need to report the same when filing your Income Tax Return to get the tax benefit. Tax benefits shall only be available on the amount invested and not on the interest or bonus accrued.

What are the Terms and Conditions of the 80CCC Section?

Here is a list of terms and conditions for the 80ccc section:

• This 80CCC section is available to those individuals who have paid the sum for insurance renewal or purchase of a life insurance policy from their taxable income.
• In terms of Section 10 (23AAB), the payment of funds from the policy should be made from the accumulated funds.
• If any bonuses are received, or interest is accumulated, it is not eligible for deduction under Section 80CCC.
• Any amount received from the policy as a monthly pension is liable for taxation as per the prevailing rates.
• If the policy is surrendered, the amount would also be subject to taxation.
• Any rebates that were available on investment in annuity plans before April 2006 are not allowed under Section 88.
• Any amount that is deposited before April 2006 is not eligible for deduction.

What is the Tax Benefit Allowed on Investments u/s 80CCC?

The following are the tax implications and benefits u/s 80CCC -

• Investment Amount: You get a complete deduction up to Rs 1.5 lakh.
• Pension or Withdrawal amount received: This amount is fully taxable in the hands of the receiver.
• Interest or Bonus Received: The amount received shall also be fully taxable in the hands of the receiver.

The aggregate deduction under sections 80C, 80CCC, and 80CCD(1) cannot exceed Rs.1,50,000.

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