Deduction under section 80CCC of Income Tax Act

To encourage the assessee to save and invest their hard-earned money, numerous deductions under income tax are offered by the Government. Such deductions also facilitate tax savings for the assessee. One such offered deduction is deduction under section 80CCC of the Income Tax Act.

The present article exclusively covers the topic ‘deduction under section 80CCC of the Income Tax Act’ along with the Frequently Asked Questions.

An eligible person for claiming deduction under section 80CCC

Before understanding the provisions of section 80CCC, it is important to understand the categories of persons who are eligible for deduction under section 80CCC – 

Deduction under section 80CCC is available to an individual who has paid / deposited any amount, out of the income chargeable to tax, towards renewal or new purchase of the specific annuity plan or the pension funds.

Some derived conclusion related to Section 80CCC deduction

• Deduction under section 80CCC is available to an individual which includes both resident individuals as well as a non-resident individual.
• Deduction under section 80CCC is not available to a Hindu Undivided Family (HUF).
• Deduction under section 80CCC is allowed only if the amount is paid / deposited out of the income chargeable to tax i.e. the amount paid / deposited out of the exempted income is not allowed.

The eligible amount of deduction under Section 80CCC

The whole of the amount paid / deposited towards renewal or new purchase of the specific annuity plan or the pension funds is allowed as deduction. However, the amount of interest or bonus accrued or credited to the account is not allowed as deduction.

Points to be taken care of for claiming deduction under section 80CCC –

• The deduction towards only those pension funds is allowed, which are specified under section 10 (23AAB).
• Section 10 (23AAB) of the Income Tax Act covers contribution towards an annuity plan offered by the Life Insurance Corporation of India (LIC) or any other insurer under a pension scheme. However, such pension scheme should be approved by the Insurance Regulatory and Development Authority of India (IRDAI).
• The deduction amount under section 80CCC cannot exceed the net taxable income.

Consequence on withdrawal of the amount –

The amount which is allowed as a deduction under section 80CCC can be received by the individual assessee / nominee of the assessee in the following manner –

• The amount can be received by surrendering the annuity plan; or
• The amount can be received as a pension.

When such amount is received by the individual assessee / nominee of the assessee, the same shall be deemed to be the income of the individual assessee / nominee of the assessee and shall be chargeable to tax in the previous year in which the amount is received.

Collective maximum allowable deduction –

Provisions of section 80CCE of the Income Tax Act restricts the collective maximum deduction available under section 80C, section 80CCC and section 80CCD (1) to INR 1.50 Lakhs.

In other words, total deduction under section 80C, section 80CCC and section 80CCD (1) cannot be more than INR 1.50 Lakhs.

Frequently Asked Questions (FAQ) –

1. What is section 80CCC?

Any amount paid / deposited towards any annuity plan of the Life Insurance Corporation of India or any other registered insurer for the purpose of receiving the pension from the fund is allowed as deduction under section 80CCC.

2. What is the difference between Section 80C and Section 80CCC?

The basic difference between section 80C and section 80CCC is that under section 80C amount can be paid even out of income not chargeable to tax, however, under section 80CCC amount needs to be paid only out of the income chargeable to tax.

3. Is section 80CCC deduction available after exhausting the limit of deduction under section 80C?

No. Total deduction under section 80C, section 80CCC and section 80CCD (1) cannot be more than INR 1.50 Lakhs.