What is Section 80CCC?

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.

Key points:

  • 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).

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