Introduction:

Section 80CCC of the Income Tax Act of 1961 permits individuals to claim annual deductions of up to Rs. 1.5 lakh for contributions towards designated pension plans offered by life insurance companies, with the overall deduction being subject to the limits outlined in Section 80C.

Section 80CCC:

Section 80CCC provides for investment-based deductions, which allow taxpayers to deduct payments into a pension fund, provided the conditions specified in the section are met. However, not all contributions to a retirement fund are eligible for deduction under section 80CCC; Only contributions to specified pension funds are eligible. Like the provident fund deduction, a fixed amount is deducted from the employee’s monthly salary and deposited into a pension fund designated by the employer Employees can take this deduction implemented under Section 80CCC.

The limited exemptions under Section 80CCC include the cost of new schemes or contributions to renew or repair existing ones. To qualify for this exemption, the plan must provide a pension or periodic annuity. Section 80CCC is interconnected with Sections 80C and 80CCD(1), thereby limiting the total exemption limit to Rs. 1,50,000 per annum.

Eligibility for Section 80CCC:

Eligibility criteria for deductibles include:

 • An individual taxpayer who is enrolled in an annuity plan offered by an approved insurer.

• Hindu Undivided Family (HUF) is not eligible for exemption under Section 80CCC.

• This policy applies equally to residents and non-residents.

• The deduction required under Section 80CCC should not exceed the taxable income of the customer.

Deduction Limit :

Individuals should be aware that the limit of stand-alone deduction under 80CCC is not Rs. 1.5 lakhs is available. Rather, this limitation applies to section 80C and section 80CCD(1). This means that the total expenditure for these three sections  should not exceed Rs. 1.5 lakhs is available.

Key features of Section 80CCC:

Individuals should note the following items regarding this section.

• A deduction can be claimed for all contributions saved or paid towards the retirement plan. However, this amount may exclude any salary or interest accrued in the assessee’s account.

 • If the taxpayer receives any pension from the scheme claiming the exemption, the pension will be taxed as part of their gross income for the current financial year.

 • Only individuals are eligible to claim benefits under 80CCC, ie. Hindu Undivided Families (HUFs) are not eligible for deduction under this section.

• Deduction under Section 80CCC can be claimed only if the taxable income of the person exceeds the special limit.

 • Section 10 (23AAB) defines qualifying pension funds to be invested in order to avail benefits under section 80CCC.

 • Individuals can only claim a deduction for premiums paid in the previous year. If a contribution is made to an annuity plan as a lump sum, the individual will be eligible to claim the deduction for the year in which it was paid.

Section 10 (23AAB):

Section 10 (23AAB) prescribes pension funds in which a person may contribute to qualify for deduction under 80CCC. As per Section 10 (23AAB) of the Income Tax Act, the following investments by individuals in pension funds, whether by way of fresh purchase or renewal, are deductible under 80CCC:

• Investment in any other pension fund offered by a recognized insurance company in India.

• Insurance companies approved by the Insurance Regulatory and Development Authority of India (IRDAI) can offer pension schemes to customers.

80CCC and New Tax Regime:

Implementation of the new tax regime in India from FY 2020-2021 may result in loss of many tax benefits, deductions and exemptions for taxpayers. Despite this, the new tax system results in lower tax rates compared to the old tax system.

Under the new tax system, individuals cannot claim all the deductions allowed under the old tax system. In particular, only deductions under section 80CCD(2) are allowed in the new tax regime. Other common deductions in section 80C such as 80CCC, 80CCD(1), and 80CCD(1B), are not available to the person.

Conclusion:

Understanding Section 80CCC of the Income Tax Act, it is obviously beneficial for those taxpayers who have participated in retirement annuities. This program helps to reduce their taxable income and overall tax liability.