Section 80CCC is an important section of Chapter VI A that outlines the provisions for deductions on contributions made to specific pension funds. You can claim a deduction of up to ₹1.5 Lakhs on costs incurred when investing in a new pension plan or renewing the existing one that pays periodic annuity. The amount received as bonus or interest on the annuity is taxable during the receipt year.

Eligibility Requirements for Deductions u/s Section 80CCC

Understanding these requirements will help you plan your finances and get the maximum deductions. Here is an overview of the eligibility criteria to qualify for tax deductions under Section 80CCC: 

  • It is only applicable on renewal policy or if you get a new life insurance policy 

  • The annuity plan or pension has to be issued by the Life Insurance Corporation of India (LIC) or any other policy from a recognised insurer

  • The payment should be in accordance with the provisions of Section 10, Clause 23AAB

  • If you receive any interest or bonus from the pension policy, it will be taxable

  • The payout from the pension plan is considered as taxable income

  • If you surrender the pension policy, the surrender value received is taxable

Tax Deduction Limit under Section 80CCC

The section states that the maximum deduction you can claim is ₹1.5 Lakhs. However, this limit is to be read simultaneously with Sections 80C and 80CCD. This means that the total deduction limit under Sections 80CCC, 80CCD, and 80C is ₹1.5 Lakhs.

Taxation on Withdrawal/Surrender of the Policy

You can make a withdrawal from the policy or surrender it. However, as per the provisions of Section 80CCC of the Income Tax Act 1961, the amount will be taxable. The taxation depends on the income tax slab you fall under.

Taxation on Maturity Proceeds

According to Section 80CCC of the Income Tax Act, the annuity proceeds are taxable. This is because annuity payments come under ‘Income From Other Sources’. The tax amount will be computed as per the applicable tax slab rate.

Frequently Asked Questions

Can you claim deductions under Section 80CCC and Section 80C?

Yes. A total deduction of ₹1.5 Lakhs is available under Section 80CCC and 80C.

How many times can I claim tax deductions under Section 80CCC in a year?

You can only claim deductions under Section 80CCC once in a financial year.

Can non-residents of India claim Section 80CCC deduction?

Yes. NRIs can claim deductions under Section 80CCC. However, u/s 10 (23AAB), you can only claim deductions on contributions made to pension funds.

Are the proceeds from annuity plans exempted from tax?

No, these proceeds are not tax-free. The bonus and interest accrued are taxable.

Is the tax benefit under Section 80CCC available for contributions made to NPS or APY?

No. However, these are eligible for tax deductions under Section 80CCD of the Income Tax Act, 1961.

Are Section 80C and Section 80CCC of the Income Tax Act the same?

No, Section 80C entails deductions on premiums paid for life insurance and other investment options. Whereas, Section 80CCC provides a deduction for the contribution to specified pension funds.

Which investments or plans come under Section 80CCC?

You can claim tax deductions u/s 80CCC for investing in certain pension schemes only if they pay annuity.

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