Section 80C, 80CCC and 80CCD: Understanding Tax Deductions

9-July-2021 |

 We all try to save tax by using income tax deductions to reduce the taxable income. Many times, due to a lack of proper understanding of the available income tax standard deductions, we end up paying more tax than we are supposed to. The result is we then need to run around a chartered accountant to file returns and get back tax refund.

You might have come across terms like Section 80C, Section 80CCC while buying life insurance plans that could be used as deductions to reduce taxable income. But what many people don't know is that along with these sections, few more sections could help reduce taxable income.

Let us know these sections in detail.

 

What Comes under Income tax Section 80C?

Under Section 80C of the Income Tax of India, an Individual or Hindu undivided family (HUF) can claim tax deductions on the taxable income up to a limit of Rs 1,50,000. This taxable income deduction could be availed by investing in tax saving instruments and tax-saving investments like the following.  

 

  • Employee Provident Fund (EPF): As per statutory compliance, both the employer and employee contribute about 12% of the basic salary that is disbursed to the employee to EPF fund for the purpose of retirement benefits. All Employees contributions are eligible for tax deductions.

  • ELSS Funds (Equity-Linked Savings Schemes): These are mutual fund schemes that invest majorly into equities. Investments made in these funds can be claimed as deductions under section 80C (subject to fulfilment of conditions).

  • Infrastructure Bonds: These pertain to government-approved infrastructure bonds issued by special financial vehicles set up for infrastructure development in the country.

  • Life Insurance Premiums: All the premiums that are paid for availing of life insurance policies are also eligible as deductions under this section.

  • NSC – National Savings Certificate: This scheme is offered by the postal department of India. An investment made under this scheme is eligible for taxable income deduction.

  • Tuition Fees of Children: Even tuition fees that are paid for any college or university in India are eligible for deduction under Section 80C. One can avail of this deduction only for two children.

  • Home Loan: Individuals who have a home loan can avail of benefits of home loan repayment as principal repayment of home loan is eligible as deductions under this section.

  • Post Office Fixed Deposits: These are 5-year deposits offered by the post office, investment in which are eligible as a deduction under Section 80C.

 
What comes under Income Tax Section 80CCC?

Section 80CCC of the Income Tax Act allows for income tax deductions that taxpayers can claim for purchasing certain annuity plans or pension funds offered by public insurance companies. It is necessary that such funds need to be eligible under reference Section 10(23AAB).

There are no exemptions under these type of policies where payment proceeds like a bonus and accrued interest are always taxable. This deductions can be claimed by both resident and non-resident Indians, whereas a Hindu undivided family cannot claim deduction under this Section.  

 

Certain pointers while availing benefits under this section:

 

  • The maximum deduction that can be claimed is Rs 1,50,000.

  • You cannot claim deductions for the bonuses or interest accrued under the annuity policies.

  • All the proceeds from the annuity plans, pension plans are taxable.

  • The pension from the policy needs to be paid as per conditions laid in Section 10(23AAB).

  • Even if you surrender the plans for any reason, the surrender value that is paid back will be taxable.

 
What comes under Income Tax Section 80CCD?

Section 80CCD specifically pertains to contributions made for two of the government pension schemes that are very popular amongst the public. They are the National Pension Scheme (NPS) and the Atal Pension Yojana (APY). Section 80CCD has three different sections, namely the following.

 

  • Section 80CCD (1): Tax deductions are applicable under this section for any self-employed individual, government or private sector employee, all the citizens of India and even NRIs. Every salaried employee could avail of a deduction of up to 10 % of their salary. In the case of a self-employed individual, this could be ascertained as 10% of the individual's gross income subject to maximum of Rs. 1 lakh.

  • Section 80CCD (2): This section pertains to contributions towards NPS. An employee could claim a deduction under this section if his or her employer does make a payment to the employee's NPS account. Even in this section, the limit is set at 10% of the employee's salary subject to a maximum limit of Rs. 1 lakh.

  • Section 80CCD(1B): This Section was introduced by amendments during the Union Budget 2015. It offers an additional deduction of Rs 50,000. This deduction was made available only for individuals who contributed to NPS, be it salaried or self-employed individuals. Including the other two sections, the maximum deduction that can be availed is Rs 2 Lakhs.

 
Can I claim both 80C and 80CCD?

Both 80C and 80CCD come under the deductions available under Section 80 of the Income Tax Act, 1961. In contrast, deductions that are available under 80CCD cannot be availed under 80C. The combined deductions that are allowed is up to Rs 1,50,000 only. At the same time, one can claim an additional deduction of Rs 50,000 under Section 80CCD(1B). Thus, making the total deduction that could be availed to Rs 2 Lakhs.

 

What is the difference between 80CCC and Section 80CCD?


Section 80CCC deals with deductions that can be availed for contributions made towards annuity plans, pension plans eligible under Section 10(23AAB). Whereas Section 80CCD only pertains to deductions for the two plans offered by the Government of India, namely the National Pension Scheme (NPS) and Atal Pension Yojana (APY).

 

Summing Up

Knowing the Sections would help you plan your tax savings more strategically, thereby aiding your savings for future financial needs. You should always choose investment plans or schemes, keeping your short term and long-term financial goals in mind.

If you are looking to save tax* and generate returns for your retirement, you can opt for Tata AIA Savings Insurance plans as the premium paid for Tata AIA policy would be eligible for tax deductions*. These savings plans help secure your family’s financial future by building wealth and generating guaranteed1 returns.

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Disclaimer
  • Insurance cover is available under the product.

  • The products are underwritten by Tata AIA Life Insurance Company Ltd.

  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.

  • For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.

  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.

  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.

  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.

  • 1Guaranteed Returns/Payouts depend on Plan Option, Policy Term, Premium Payment Term and Age at entry.