Deduction in respect of contribution to certain pension funds
Section 80CCC of the Income Tax Act 1961 provides tax deductions
for contribution to certain pension funds. The section provides
tax deduction up to a maximum of Rs.1.5 lakh per year on expenses
incurred in buying a new policy or continuing an existing policy
that pays pension or a periodical annuity. It works in conjunction
with section 80C and 80CCD(1) so that the maximum total deduction
available under all three sections (80C, 80CCC & 80CCD(1)) is Rs. 1.5 lakh.
Who is eligible?
- Any individual is eligible.
- HUFs (Hindu Unified Family) are not eligible.
- The plan must be for receiving pension from a fund referred to in Section
10(23AAB). Amount for policy must have been paid out of income chargeable
to tax (deduction cannot exceed the taxable income).
- Interests or bonuses accrued from the policy are not eligible to be claimed as tax deductions.
- The proceeds from the policy as pension funds are liable for taxes as they will be treated
as income of previous year. This includes accrued interests and bonuses, if any.
- The amount received after the surrender of annuity plan whether in whole or in part is also chargeable to tax.
Pension received from the annuity plan is also chargeable to tax.
Frequently asked questions about section 80CCC
What is the difference between section 80C and section 80CCC of the Income Tax Act 1961,
in terms of amount paid towards annuity plan of LIC or any other insurer?
Under section 80C amount can be paid from income not chargeable to tax but u/s 80CCC amount must be paid out of income chargeable to tax.
Can a non-resident Indian claim the deductions?
Yes, both residents and non-residents can claim deductions u/s 80CCC. However, an HUF is not eligible for this deduction.
Can I claim section 80CCC deductions after exhausting the limit of section 80C deductions?
No. Section 80CCE says that there is an aggregate limit of Rs. 1.5 lakh on the deductions u/s 80C, 80CCC and 80CCD(1).