80CCC: What is Deduction under Section 80CCC?

Section 80CCC of the Income Tax Act 1961 offers tax deductions up to Rs 1.5 Lakhs per year for contributions made by a person towards certain pension funds offered by a life insurance policy. The 80CCC deduction is within the limit of section 80C.

So, to avail of this deduction, you must buy a life insurance policy or renew a policy that will offer you a pension.

Terms and Conditions of Section 80CCC

Deduction under section 80CCC of the Income Tax Act is available to taxpayers who meet the following conditions:

a) A maximum deduction of Rs 1.5 lakhs is allowed
b) The assessee (taxpayer) has to be an individual for the deduction
c) The amount has been paid out of your (taxpayer) taxable income
d) You have invested the amount in a pension plan from one of the life insurance companies
e) The amount you will receive as a pension from such pension deposits will become part of your taxable income
f) The amount you receive from such a policy for which you had availed a deduction under section 80CCC, after the surrender of the policy will be a part of your taxable income
g) Investments before April 2006:

Who is Eligible to Claim a Deduction under Section 80CCC?

You can claim a deduction under section 80CCC if you meet the following conditions:

a) You are filing your ITR as an individual taxpayer
b) You have invested in a pension plan from an approved insurance provider
c) The deduction is available to both resident and non-resident taxpayers
d) Deduction under section 80CCC is not available to HUF

How much can you Claim under Section 80CCC?

a) You can claim a maximum deduction of up to Rs 1.5 lakh under section 80CCC.
b) The deduction limit of section 80CCC is included with 80C and 80CCD. That is, you can avail of the maximum deduction by clubbing all the 3 sections.
c) 1.5 lakhs = 80C+80CCC+80CCD(1)

When can you not Claim a Deduction under Section 80CCC?

a) If you receive any amount on surrender of the policy, then this amount will be subject to tax based on the previous year.
b) If you have received any interest or accrued any bonus from the policy, then you cannot avail of a deduction of this amount. The deduction will be allowed, excluding these bonuses.
c) If you have made deposits before 2006 then you cannot avail of the deduction.

What is Section 10 (23AAB)?

Clause 23AAB under section 10 defines the eligibility conditions for the pension funds for the deduction under section 80CCC of the Income Tax Act. As per this clause, the eligible funds will have to be:

a) Setup by either Life Insurance Corporation of India or any other insurer as a pension scheme
b) The contributions to these funds will be made by individuals to receive a pension
c) Approved by the Controller of Insurance or IRDAI (Insurance Regulatory & Development Authority of India)

Important Points Related to 80CCC Deduction

These are the salient points about deduction under Section 80CCC of the Indian Income Tax Act:

a) The deduction is available to individual taxpayers only who wish to receive a pension from the fund or scheme
b) The funds which receive the invested money must be a part of a pension scheme from an approved life insurance provider
c) The maximum deduction you can avail of will be limited to the amount provided in the section (Rs 1.5 Lakh w.e.f. FY 2016-17)
d) The pension amount you receive from the policy will be taxable
e) If you surrender the policy the surrender money received will become a part of your taxable income for the FY