Section 80CCC - Deduction under Section 80CCC

You might be aware of the income tax deductions allowed as per Section 80C of the Income Tax Act. Section 80CCC, a subsection of 80C allows you to save tax on the premium paid towards the purchase or maintenance of a plan from an insurance company that provides pension or annuity

What is Section 80CCC?

It allows you to save tax on the amount spent to buy, renew or continue a policy that provides pension or annuity for the rest of your life. The deduction limit for Section 80CCC is clubbed with that of 80C and 80CCD(1).

Deduction under Section 80CCC - Terms & conditions

  1. The amount to be claimed as 80CCC deduction either to renew an existing policy or buy a new one should have been paid from the taxable income of the individual taxpayer

  2. The amount received upon surrender of the policy or as a monthly pension will be taxed and not be eligible for deductions or exemptions.

  3. Accumulated interest or a bonus received by the taxpayer is not eligible for deductions as per 80CCC

  4. Discounts available on annuity plans prior to April 2006, as well as any amount deposited before this date does not qualify for tax saving purposes.

  5. Only those funds prescribed under Section 10(23AAB) are applicable for availing deductions.

What is Section 10 (23AAB)?

Section 10 (23AAB) specifies that any amount towards buying or maintenance of a pension plan from an insurer registered by the Insurance Regulatory and Development Authority of India is eligible for a deduction when filing your income tax return. The pension fund by the insurer should have been in force on or after August 1, 1996 in order to qualify for an exemption.

Eligibility for Claiming Deductions under 80CCC

  1. A taxpayer, either resident or non-resident of India can claim income tax deduction if he or she has invested in the prescribed annuity plan from a recognized insurance company.

  2. A Hindu Undivided Family (HUF) is not allowed to claim a tax rebate under this section

  3. The amount to be claimed as 80CCC deduction should be equal to or less than the taxable income of the individual

Claiming 80CCC Tax Deductions

You can avail tax benefit for your investment in a pension or annuity plan when you file your annual tax return. Salaried individuals find a dedicated column in ITR-1 form asking them to provide details on investments made by them in the previous year. These range from tax deductions allowed from 80C to 80U that you can enter as per the amount invested.

Key points related to Section 80CCC

  1. Deductions under this section are merged together with the broader Section 80C and Section 80CCD(1). You can save on your income tax a maximum of ₹ 1.5 lakh by investing across all three sections.

  2. You can also choose to avail a maximum exemption up to ₹ 1.5 lakh under 80CCC. In that case, the tax-saving limit as per Section 80C is exhausted, you cannot claim further deductions as per sub-sections specified under 80C.

  3. A public or private insurance company that provides a pension or annuity plan towards which you contribute a regular amount qualifies you for a 80CCC tax benefit

  4. 80CCC deduction can only be availed for the year immediately before the assessment year for which tax is being computed. This applies in a case where a taxpayer has paid an amount for a few years as a lump sum to the insurance company to keep the policy active

Conclusion

Section 80CC is an effective way to reduce your tax burden by investing in a plan that also provides financial security during retirement by providing a pension or annuity. It is important to keep a track of the amount paid towards keeping your annuity plan active in order to claim a deduction as per 80CCC every year.

If you have hit the upper limit on your deductions under Section 80C, 80CCC and 80CCD, you can invest in a number of other financial instruments to avail of further deductions and exemptions. For instance, investing in term insurance helps you avail of exemptions under Section 10(10D) as well as deductions under 80D. Under Section 10(10D), the payout received from your policy is exempted from taxation. Those who opt for a health-related rider, can be eligible for deductions up to Rs. 25, 000 under Section 80D. You can consider investing in the Bajaj Allianz Term plan, which is available on Finserv MARKETS, to enjoy these tax-saving benefits. In addition to this, you can benefit from a high sum assured of up to Rs. 1 crore at just Rs. 13 a day. You can also make the most of this plan by opting for its Critical Illness Rider, which covers up to 55 critical illnesses. Reap in the dual benefits of tax-savings and financial protection by opting for the Bajaj Allianz Smart Protect Goal on Finserv MARKETS.

FAQs

  • ✔️How does Section 80CCC differ from 80C?

    80CCC is a subsection of 80C, which encompasses multiple sections allowing for tax benefits. The amount to be claimed as a tax benefit as per 80C can come from a part of your earnings that are not taxable. However, 80CCC deduction applies specifically to premiums paid towards pension or annuity plans from your own income, on which you are taxed.
  • ✔️Can I claim tax benefit towards my investment in the National Pension scheme or Atal Pension Yojana as per 80CCC?

    There is a separate section called 80CCD which pertains to deductions on annual contributions made towards National Pension Scheme or Atal Pension Yojana
  • ✔️Can I save tax under both 80C and 80CCC?

    Let us assume that you’ve purchased a pension plan and made a payment of ₹ 1.5 lakh towards it. You cannot claim any further amount as per Section 80C, since you have exhausted the limit of tax deductions. However, if you spend ₹50,000 for policy maintenance towards an annuity plan, you still have ₹ 1 lakh to claim as a deduction under 80C.

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