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Section 80CCC: Income Tax Deductions on Pension Fund Contributions

Did you know that investment in pension funds can save you a lot in tax? Section 80CCC under the Income Tax Act allows you to save up to ₹1,50,000 per year.
 

Income Tax

Every year, the cost of living is increasing. With the rising inflation, the money-making tools in our financial system are gradually losing their edge. The rate of inflation is beating the interest rates on conventional saving schemes. Then how does one secure their retirement?
 

The most common answer would be to invest in pension funds. 
 

Investing in pension funds has more benefits. You can claim tax deductions under Section 80CCC of the Income Tax* Act, which is a big help for people to plan their financial future. 
 

To know more about pension fund 80CCC deductions, Section 80ccc deduction list, and more, keep reading this blog.

What is Section 80CCC?

Section 80CCC is a part of Section 80C of the Income Tax Act. The latter is a larger section allowing tax exemption for investment funds like EPF/VPF, PPF, and life insurance plans. 
 

Section 80CCC, in this regard, particularly makes investors eligible for tax deductions for their contribution to pension funds. You will only be eligible for pension fund 80CCC deductions for investing in pension plans designated under Section 10 (23AAB)#.
 

Since Section 80CCC is a part of Section 80C, the total exemption under this head is limited to ₹1,50,000 per year.

Features of Section 80CCC of the Income Tax Act of India

Here is what you need to know about Section 80CCC deduction. 
 

  • You are only eligible for pension fund 80CCC deductions if you bought a pension plan or renewed an existing one from designated insurers.

  • Section 10(23AAB)# directs that the payment for the pension will be paid from the accrued funds.

  • Any interest or bonus you earn from the policy will not be tax deductible.

  • In a financial year, the maximum permitted deduction is ₹1.5 lakhs.

  • If you surrender the annuity plan, it will be regarded as your income and taxed according to your applicable tax slab.

  • Section 88 does not allow any rebates on investments in annuity programs made before April 1, 2006.

  • If you have deposited any amount in an annuity plan before April 1, 2006, it will not be eligible for deduction. 

  • You can only claim tax deductions for the preceding year. If you have made the payment in one go, you can only benefit from pension fund 80CCC deductions for that particular year.

Section 10 (23AAB)#

Section 10 (23AAB) is linked to Section 80CCC of the Income Tax Act. Section 10(23AAB) states that the pension fund must have been set up before August 1996. Also, it states that the taxpayer should contribute to the policy with the intention of earning a pension. 
 

Section 10(23AAB) directs that the payment for the pension will be made from the accrued funds, and any bonus you earn from the policy shall not be taxed. 

Who is Eligible for 80CCC Deduction?

You might be wondering if you are eligible for the 80CCC deduction. Let us find out.
 

  • Any individual taxpayer who has invested in an annuity plan from a designated insurance company is eligible for tax deduction under Section 80CCC.

  • HUF or Hindu Undivided Family is not eligible for pension fund 80CCC.

  • Both resident and non-resident Indian taxpayers are eligible for an 80CCC deduction.
     

Claim Limit of Section 80CCC

  • You cannot claim a deduction under Section 80CCC pension scheme that is higher than your net taxable income.

  • The maximum permitted deduction under Section 80CCC is ₹1.5 lakhs.

  • Since 80CCC is part of a larger section 80C of the Income Tax Act, the total deduction amount under 80CCC is a part of the total deduction allowed under section 80C. 

The total deduction = 80C + 80CCC + 80CCD = ₹1.5 lakhs


Section 80CCC vs Section 80CCD vs 80C

Often, people get confused between Section 80CCC, 80C, and 80CCD of the Income Tax Act. To simplify it, 80CCC and 80CCD are parts of a larger Section 80C, and they authorise the taxpayers to claim tax deductions under different heads. 
 

80CCC in income tax allows tax deductions for investing in designated pension schemes like LIC, whereas 80CCD allows tax deductions for investing in only the National Pension Scheme. And all of these deductions are included in Section 80C. 
 

So, if you have not yet invested in any annuity plans, it is time you consider investing. Look at Tata AIA Retirement Plans that offer investment tax benefits.

Conclusion 

We hope this blog helped you understand the nuances of tax benefits under Section 80CCC of the Income Tax Act. But while choosing an annuity plan for investing, make sure these plans are approved by the Controller of IRDAI and are designated under Section 3(1) of the Insurance Regulatory Act.

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Frequently Asked Questions

What is the maximum tax deduction limit under Section 80CCC of the IT Act?

An individual taxpayer is eligible for tax deduction under the 80CCC pension scheme, and it is limited to ₹1.5 lakhs per year.

Can I claim a tax deduction under both Section 80C and 80CCC?

Section 80CCC is a part of Section 80C of the Income Tax Act that only permits deductions for investing in pension schemes. So, if you are investing in PPF and LIC, you will be eligible for deduction under Section 80CCC and thereby under Section 80C. However, the total limit of tax exemption stays at ₹1.5 lakhs per year.

If I surrender the annuity plan, would I still be eligible for a deduction under Section 80CCC?

If you surrender the annuity plan, it will be considered your income and taxed according to your applicable tax slab.

Disclaimers

  • 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.

  • Tax: *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.