The Indian Income Act, 1961, has many provisions that allow individuals to claim tax deductions under different sections. One such popular section is 80CCC. It allows you to claim tax benefits on the contributions you make to certain pension funds. However, you must know that the pension amount you receive, which includes the accrued bonus, is taxable as it is considered an income.
Another important thing you must know about Section 80CCC deductions is that it is clubbed with the limit guaranteed under Section 80C and Section 80CCD. This means the overall tax deduction you can get under Section 80CCC is limited to Rs. 1.5 lakhs in a financial year.
The tax deduction under Section 80CCC of the Indian Income Tax Act is available not just for Indian residents but also for non-resident Indians who have purchased a pension plan in India. If you pay taxes in India and have paid any amount to continue your annuity plan for receiving a pension in the future, you can claim this deduction on the amount paid from your total gross annual income. The 80CCC deductions can be claimed only by individual taxpayers, and it does not apply to HUF (Hindu Undivided Family).
You can claim the 80CCC deductions only for the year in which you have made the contributions to the annuity. For example, let us assume you make a one-time payment; you can claim this deduction in the same year in which you make the contribution even though the policy may remain active for many years. However, suppose you choose the regular premium payment mode and pay the premium every quarterly, half-yearly or annually. In that case, you can claim the deduction every year when you make the payment.
Different Terms of Section 80CCC
There are some conditions associated with claiming deductions under Section 80CCC, which are –
- You can claim the tax deduction on the amount paid towards buying or continuing an annuity plan that you have purchased from LIC or any other insurance company.
- The maximum deduction you can claim in a financial year is Rs. 1,50,000.
- The policy for which you make payments must pay the pension from the accumulated funds as per the terms of Section 10(23AAB).
- You cannot claim a deduction on the accrued interest or bonus payments you get from the policy. In addition, the payout you get from the policy is considered income and taxable per your regular tax bracket.
- The proceeds you get by surrendering the annuity plan, whether in part or whole, will be considered an income and will be taxed accordingly.
Eligibility criteria for claiming deductions under Section 80CCC
Any individual taxpayer who makes a contribution towards his/her annuity plan offered by any insurance company is allowed to claim the deduction under this section. The individual taxpayer can be a resident or a non-resident citizen. Tax deductions under Section 80CCC are not available for Hindu Undivided Family.
Now that you know the tax implications under Section 80CCC, do your diligence and ensure that you take advantage of the tax benefit guaranteed under the section and reduce your annual tax liability.
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