Section 80CCF is a deduction available for resident Indians and Hindu Undivided Family member who prefers to invest in the government approved bonds. The deduction limit is up to Rs 20,000 per year and applicable on long-term bonds having a minimum tenure of 10 years with a lock-in period of 5 years.
Section 80CCF of the Income Tax Act is a special provision introduced for benefiting the investors of certain government-approved bonds schemes. The section was discontinued w.e.f AY 2013-2014, has been brought back and applicable for AY 2018-2019. Section 80CCF was formulated in the year 2010 and came in force in 2011 under the income tax act. The government has re-introduced this section to encourage investments in the infrastructure projects of the country at the same time helping tax payers reduce their liabilities.
Chapter VIA of the Income Tax Act deals with provisions related to deductions that are available while computing the total taxable income. Section 80C has a comprehensive list of deductions.
Investors should remember that Section 80CCF applies only to certain investments.
Let us consider an example for better understanding
Mr Vilas, aged 35, works in an Information Technology Company, has earned a salary of Rs 6 lakhs this year. As per the income tax slabs, he is liable to pay tax on the amount exceeding Rs 2.5 lakhs, i.e. on Rs 3.5 lakhs. In order to reduce his tax liability, he invests Rs 100000 in schemes eligible for the deduction of section 80C. The limit of section 80C is Rs 1.5 lakh
Thus, now his taxable income at Rs 3.5 lakhs minus Rs 1 lakh = Rs 2.5 lakhs
Further, he also invests in government approved infrastructure bonds worth Rs 30,000.
Such bonds being eligible for deduction u/s 80CCF reduces his taxable income to Rs 2.5 lakhs minus Rs 20,000 = Rs 2.3 lakhs as the deduction u/s 80CCF is up to Rs 20,000.
Thus, we can see that Mr Vilas has reduced his tax liability considerably.
Individuals who wish to claim this benefit must furnish the following documents
The government hasn’t specified the list of bonds eligible u/s 80CCF for AY 22018-2019. But corporation like LIC, IFCCI, Government approved NBFCs are eligible.
The IFCCI asked for the re-introduction of this section in the union budget 2018. The government wants to encourage investment in infrastructure bonds with a view of developing the overall infrastructure of the country. Section 80CCF is an attractive provision for investors seeking to invest in government bonds plus saving tax liabilities.
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