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  7. Section 80CCC - Tax Deductions on Pension Fund Contributions

Section 80CCC Income Tax Deduction ACT 1961 for Contribution to Pension Funds

Updated on: 16 Jan, 2024 05:49 PM

When it comes to saving tax liabilities, the most commonly used options include Section 80C, 80CCD, and 80CCC under the Income Tax of India. With Section 80CCC, a taxpayer can save a considerable amount of tax by making contributions to pension funds.

Let’s explore Section 80CCC in detail –

Contents

section 80CCC

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.
  • 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 followings 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.

Frequently Asked Questions

Questions related to Section 80CCC of the Income Tax Act, 1961, are endless. Here we have curated a list of some of the most frequently asked questions about the same. These will help you curtail confusion to a great extent. Let’s have a quick look –

Q- Under Section 80CCC of the Income Tax Act, 1961, what is a pension fund?

It can be defined as an investment product that provides income after retirement. Under Section 80CCC of the Income Tax Act, 1961, a taxpayer can claim tax deductions against the monetary contributions made towards specified pension funds which has been offered by an approved insurance company.

Q- What if you are an NRI (Non-Resident Indian)? Are you still entitled to make this claim?

Yes, even if you are an NRI, you are entitled to claim a tax deduction under Section 80CCC of the Income Tax Act, 1961.

Q- Can HUF take the tax benefit u/s 80CCC?

HUF (Hindu Undivided Family) is not allowed to claim tax deductions under Section 80CCC of the Income Tax Act, 1961.

Q- Can you claim under Section 80C and 80CCC of the Income Tax Act, 1961?

Yes. However, the aggregate limit under sections 80CCC, 80C, and 80CCD is Rs. 1.5 Lakhs.

Q- You are covered by an insurance plan that has nothing to do with pension plans. Can you still claim the tax benefit under Section 80CCC?

Well, the answer is no. You cannot make any tax deduction claim if you have paid towards an insurance plan that’s nowhere related to any pension scheme under section 80CCC.

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CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.