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Section 80CCC of the Income Tax Act makes provisions for you to claim a deduction at the time of filing your taxes for the year, only if you are availing of a scheme that pays you a pension periodically. The most significant advantage of Section 80CCC is that it helps you claim a tax benefit of up to Rs. 1.5 Lakh per year, greatly reducing your taxable income and tax liability.

 

These deductions are applicable on expenses incurred by you to purchase a new pension policy or payments made towards ensuring the continuity of an existing policy. 80CCC deductions are often applied in tandem with deductions available through other Sections, such as Section 80C and Section 80CCD(1). Over the course of this article, we will delve deeper into the various features and clauses of 80CCC deductions.

 

Eligibility Criteria for Claiming 80CCC Deduction

 

To be eligible for claiming a tax deduction under Section 80CCC, the following criteria must be met:

 

  • You must be an individual taxpayer. Other taxpayers such as companies, associations, partnerships, and Hindu Undivided Families (HUFs) are not eligible for these deductions.

 

  • If you are a resident Indian or non-resident Indian, you are eligible for deductions under 80CCC of the Income Tax Act.

 

  • To qualify for these deductions, your investment must be made in a pension plan that pays an annuity on maturity.

 

  • Deductions under this section are applicable only for the financial year in which you have made payments for the said investment.

 

  • The pension plan purchased and selected for 80CCC deductions must be approved by the Insurance Regulatory and Development Authority of India (IRDAI).

 

  • The amount claimed as a deduction, per year, under 80CCC cannot exceed the amount listed as your net taxable income.

 

TDS under Section 80CCC of Income Tax Act

 

The TDS rates, as per the Income Tax Act, can be elucidated as below:

 

Section

Particulars

Tax Rate

192

Salary Payment

Normal Slab Rate

192A

Payment pertaining to accumulated provident fund balance

10%

193

Interest earned on securities

10%

194

Income received on dividends

10%

194A

Interest earned apart from that on securities

10%

194B

Income from lottery, crossword puzzles, card games and other games winnings

30%

194BB

Income from Horse race winnings

30%

194C

Payments made to a contractor/sub-contractor

1-2%

194D

Commission on Insurance

5%

194 DA

Life insurance policy payments

5%

194EE

National Savings scheme payments

10%

194F

Repurchase of units by Mutual Funds/Unit Trust of India – payments

20%

194G

Sale of lottery tickets – commission received

5%

194H

Brokerage and commission

5%

194K

Income pertaining to units payable to a resident person

10%

194LA

Acquisition of certain immovable property – commission payment

10%

194LBA(1)

Interest amounts paid by a business to its unit holders by renting/leasing property

10%

194LBB

Payment to a unit holder by an Investment Fund

10%

194LBC

Income earned from a securitization fund

25%

194M

Commission, brokerage, fees, paid to a resident by an individual/UF

5%

194N

Cash withdrawal during the previous year from 1 or more accounts maintained with a banking company, co-operative society

2%

194O

Amount received by an e-commerce operator

1%

194P

Tax deductions by a bank for senior citizens over the age of 75

Tax on total income as per rate in force

194Q

Payments made for the purchase of goods above Rs. 50 Lakhs

0.1%

 

Deductions and Exemptions

Section 80CCC makes provisions for deductions on the income tax you pay at the end of the fiscal year, provided you meet a particular criterion. You should have made deposits or payments with regards to the purchase of an annuity plan from an insurance company like LIC, or any other recognized insurance company. To claim this deduction every year, you must ensure routine payments towards a pension fund, and all the earnings received from the same – be it bonus, or interest accrued, will then be tax-exempt for that year.

Section 80CCC deductions can be claimed by you even if you are a non-resident Indian, provided you furnish proof of your contributions towards a pension fund. However, individuals can only claim the benefits of 80CCC deductions, and not by entities such as businesses, partnerships, and Hindu Undivided Families (HUFs).

Finally, it is vital to note that you can only claim 80CCC deductions pertaining to the year for which you have paid the amount.

Conclusion

By noting the provisions of Section 80CCC of the Income Tax Act, you can plan your tax savings more prudently, thus saving more for your needs and wants. Any investment plans you choose must be done by keeping short-term and long-term financial goals in mind.

 

FAQs

  • ✔️What falls under the purview of Section 80CCC of the Income Tax Act?

    Under Section 80CCC of the Income Tax Act 1961, you can claim a tax deduction for contributions you have made to certain pension funds. However, this tax benefit applies only to payments you have made in the form of a premium for an annuity plan, issued either by LIC or by any other approved insurer. 

  • ✔️What is the maximum deduction I can claim under 80CCC?

     

    As per the guidelines set in the Income Tax Act 1961, the maximum 80CCC deduction you can claim is Rs. 1.5 Lakh per year.

  • ✔️Are the proceeds from annuity plans tax-free?

    No, any proceeds you receive from Annuity plans are not tax-free. Any sum of money you may receive from such plans, including interest and bonuses, are subject to taxation. Tax deductions under 80CCC apply only to contributions made towards an annuity plan.

     

  • ✔️As per Section 80CCC of the Income Tax Act, what is a pension fund?

    A Pension Fund is defined as an investment instrument that generates a fixed income stream post your retirement. 

  • ✔️Is it possible to claim such deductions being a non-resident Indian?

    Yes. As per the rules of the Income Tax Act 1961, even if you are a Non-Resident Indian, you can claim Section 80CCC deductions under the Income Tax Act. However, Hindu Undivided Families (HUFs) are not eligible.

  • ✔️I have a life insurance policy which is not related to pension schemes. Can I still claim benefits under Section 80CCC?

    No, in this case, you cannot claim a Section 80CCC deduction. However, if you make premium contributions towards all life insurance policies (ULIPs, Term Insurance Policies, Endowment Policies) are eligible for tax benefits under 80CCC.

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