Section 80 CCC of the Income Tax Act

The Income Tax Act of 1964 under Chapter VI provides certain exemptions that a taxpayer can avail to reduce his tax liabilities. One such exemption is provided under Section 80 CCC of the Act, which inter alia exempts income paid to pension funds by an individual taxpayer. This article, in brief, discusses the provisions of Section 80 CCC of the Act.

The Income Tax Act, 1964 (“Act”) allows taxpayers to claim exemptions under the provisions of Chapter VI of the Act. Such exemptions help an individual reduce his taxable income and thereby reduce his tax liability. Section 80 CCC of the Act allows an individual taxpayer to claim a deduction for the income deposited by him in a pension fund. However, such deduction is only available to a limit of Rs. 1,50,000 (Rupees One Lakh Fifty Thousand). 

What is Section 80 CCC of the Act?

Section 80 CCC of the Act allows the taxpayer to claim a deduction for investments made in any of the annuity plans of Life Insurance Corporation of India (LIC) or any other insurer to receive funds from the pension funds mentioned in Section 10 (23 AAB) of the Act. 
Section 10 (23 AAB) of the Act includes any fund that has been set up as a pension scheme by a recognized insurer, including LIC before August 1996.

Who is eligible to claim deductions under Section 80 CCC of the Act?

Any individual taxpayer can claim a deduction under Section 80 CCC of the Act, including non-residents. One must note that a Hindi Undivided Family (HUF) cannot claim a deduction under this Section.

Conditions for claiming a deduction under Section 80 CCC of the Act

The following conditions are required to be met in order to qualify for a deduction under Section 80 CCC of the Act, namely: 

1. The plan towards which payment made should be a pension or an annuity plan provided by either the LIC or fund that has been set up under Section 10 (23 AAB) of the Act;
2. The amount paid towards such a plan should be from the taxable income of the concerned taxpayer; and
3. The amount for which deduction is claimed should be paid in the year the taxpayer is claiming a deduction.

Amount exempted under Section 80 CCC of the Act.

Section 80 CCC of the Act provides an exemption of Rs. 1,50,000 (Rupees One Lakh Fifty Thousand). However, this limit is not a stand-alone limit under Section 80 CCC of the Act and is to be read along with the deductions available under Section 80 C and Section 80 CCD of the Act. 

In other words, it means if you have invested a sum of Rs. 1,00,000 (Rupees One Lakh) towards a pension fund and another sum of Rs. 1,00,000 (Rupees One Lakh) in a mutual fund, then you are eligible for an exemption under Section 80 CCC and Section 80 C, respectively. However, the total exemption that you can claim is only Rs. 1,50,000 (Rupees One Lakh Fifty Thousand) cumulatively under Section 80 CCC and Section 80 C of the Act. 

Other Key Points

Any bonuses received, monthly pensions received, or interest accumulated by virtue of investing in the pension fund are taxable under the Act. Further, any amount received on maturity of such pension funds is also taxable under the Act. 
Further, if the policy is surrendered and any amount is received, such amount will also be taxed under the Act. 

Anyone looking to avail a deduction under Section 80 CCC of the Act must report the same when filing their income tax return. However, please note that the exemption is only available for pension schemes, and the exemption limit cannot exceed Rs. 1,50,000 (Rupees One Lakh Fifty Thousand) cumulatively under Sections 80 C, 80 CCC, and 80 CCD of the Act.