Section 80CCC of Income Tax Act

An individual can claim tax deduction on his or her contribution towards certain pension funds under section 80CCC of the income tax act, 1961. The amount which an individual can claim under this section includes payments made towards new policy purchase, renewal or continuation of an existing policy in relation to pension plans, annuity plans etc. The maximum tax deduction an individual can avail under section 80CCC is Rs.1.5 Lakh annually for the investments made towards annuity plan of LIC, PPF, EPF, pension funds offered by registered companies in India.

80CCC: Deduction for Insurance Premium Paid

What are the eligibility conditions to claim tax deduction under section 80CCC?

  1. Both resident and non-resident individuals can claim tax deduction under section 80CCC of the income tax act, 1961.
  2. HUF’s are not allowed to claim tax deduction under section 80CCC.
  3. It is applicable on all pension or annuity plans offered by the registered and approved insurance company.
  4. In order to get eligible for claiming tax deduction, you must keep the record of your payments you made towards the insurance policy.
  5. Make sure that the amount claimed for deduction should not exceed your net taxable income under section 80CCC.
  6. The maximum deduction allowed under section 80CCC is Rs.150000 annually.

What is section 10(23AAB)?

Before going further to claim deduction under section 80CCC, you must have a clear understanding about section 10(23AAB) –

  1. As per section 10(23AAB), an individual is eligible to claim tax deduction only if he/she makes contribution towards the purchase or renewal of policy on or after 1st August 1996.
  2. The policy holder or the insurer must be recognized and approved by IRDAI.
  3. The intention of policy holder for contributing towards policy must be earning pension amount for future.

After meeting all these conditions successfully, an individual is eligible to claim tax deduction under section 80CCC.

What are the terms & conditions of section 80CCC

  1. Only individuals who made contribution towards the purchase or renewal of insurance policy are entitled to claim deduction from their taxable income under section 80CCC.
  2. If you accrue any bonus or interest on your Pension/Annuity plan, it is not eligible for deduction under section 80CCC.
  3. Any amount you are receiving from the insurance policy monthly as a pension is liable for tax as per current rates.
  4. If the payment of the pension plan is done in the form of annuities i.e. monthly income, the amount will be taxable on the basis of investor’s tax slab rate.
  5. Pension payments made to the policy holder from accumulated funds should be as per the terms & conditions of section 10(23AAB)
  6. An individual can only claim deduction on the payments made for the preceding year. Suppose an individual made contribution towards pension fund lump sum for 2-3 years then, you can only claim deduction for the amount relevant to the preceding year only.
  7. The policy holder is liable to pay tax at the time of surrendering the policy.
  8. Any rebates available on investments in annuity plans before April 2006 is not allowed under section 88.
  9. Any amount deposited before 1st April 2006 is not allowed for deduction under section 80C.

Can I claim deduction under section 80CCC after exhausting the deduction limit under section 80C?

No, you cannot claim deduction under section 80CCC after exhausting the deduction limit under section 80C. The total deduction allowed under section 80C, section 80CCC, 80CCD (1) is Rs.1.5 Lakhs. You cannot claim deduction more than the exemption limit of Rs.1.5 Lakhs.

Can I claim deduction under section 80CCC for contributions made to National pension system (NPS) or Atal pension Yojna (APY)?

No, you cannot claim tax benefit or deduction under section 80CCC for contribution made towards NPS or APY. Such contributions can only be claimed under section 80CCD of the income tax act, 1961.

Looking for any help in income tax return filing, kindly call us at 8800221252 or you can also e-mail us at info@finacbooks.com

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