Income tax sections 80c and 80ccc provide tax deductions to encourage taxpayers to save and invest, which decreases taxpayers’ tax liabilities. Individual contributions to certain pension schemes with life insurance are eligible for annual deductions of up to Rs. 1.5 lakh under Section 80CCC of the Income Tax Act of 1961. Section 80C places a limit on the deduction.
The income tax department has established several deductions from taxable income with Chapter VI A deductions to promote saving and investing among taxpayers. Various deductions help people reduce their tax liabilities, while 80C is the most well-known. Let’s examine these deductions in further detail:
What are 80C and 80CCC in income tax?
The amount spent on the acquisition of a new policy or the amount paid towards the continuation or renewal of existing insurance is included in the Section 80CCC exemption limit.
The main need for qualifying for this exemption is that the insurance policy for which the money was paid out must offer a pension or periodic annuity.
The overall exemption ceiling is set at Rs. 1,50,000 per year when Section 80CCC is read in conjunction with Sections 80C and 80CCD(1).
Section 80CCC Terms and Condition
The Act is subject to the terms and restrictions listed below: –
For people who have used their taxable income to pay the amount for a life insurance renewal or new policy.
- The policy’s payment shall be made by Section 10 (23AAB) from the accumulated money.
- There is no Section 80CCC deduction available if bonuses were received or interest was accumulated.
- Taxes at the current rates are due on any sum taken out of the policy as a monthly pension.
- The sum would likewise be taxed if the policy was surrendered.
- Section 88 prohibits any refunds on annuity plan investments made before April 2006.
- No deposits made before April 2006 are eligible for a deduction.
Section 10 definition (23AAB)
Section 80CCC and its provisions relating to Section 10 (23AAB). It concerns the revenue received through a fund established by a reputable insurer, such as the LIC.
The pension plan for the fund has to be established before August 1996. The taxpayer had to have intended to get pension income in the future when they made their contributions to the insurance.
Who is eligible for an 80C deduction?
The prerequisites for being eligible for deductions are:
- A single taxpayer has purchased an annuity plan made available by an authorized insurance provider.
- Hindu Undivided Families (HUF) are ineligible for the exemption provided under Section 80CCC.
- Both residents and non-residents must abide by these rules.
Key Information About Section 80CCC
The following are some crucial details about the 80CCC section’s application that you need to be aware of:
- To establish the overall deduction limit allowed, the Section 80CCC, Section 80C, and Section 80CCD limitations are combined (1).
- Particularly those Indian insurance companies that provide annuity or pension plans are subject to the restrictions of Section 80CCC. A governmental or private organization might also serve as the insurer.
- The premium/amount paid for the prior Assessment Year is the sole amount eligible for a deduction. If someone pays the amount over two or three years, for example, they can only claim a deduction for the portion of the payment that relates to the year prior.
- The highest deduction allowed under this Section is Rs. 1,50,000 per year.
You can reduce your tax obligation significantly by taking advantage of Section 80CCC’s provisions.
You must maintain a record of the payment for the insurance policy transaction to qualify for this exemption.
The exemption amount must never be greater than the person’s salary. Several additional sections within the Income Tax Act can assist you in reducing your tax burden in addition to Section 80CCC.
Section 80C – Investment Tax Deductions
Since it enables taxpayers to reduce their tax liability by making tax-saving investments or incurring eligible expenses, Section 80C is one of the most well-liked and well-known sections among taxpayers. The taxpayer deducts up to Rs 1.5 lakh annually from their total income.
This discount is available to both private people and HUFs. LLPs, corporations, and partnership enterprises are not entitled to this deduction.
Subsections 80CCC, 80CCD (1b), 80CCD (1), and 80CCD are all part of Section 80C. (2).
Except for an extra deduction of Rs. 50,000 allowed by Section 80CCD, the overall cap for claiming a deduction, along with the subsections, is Rs. 1.5 lakh (1b)
What are 80CCC schemes?
Section 80CCC Insurance Premium/Pension Contribution Section 80CCD and Investments that qualify for tax deductions are as follows:
PPF, EPF, LIC premiums, Equity-Linked Savings Plans, principal payments made on home loans, stamp duty and registration fees for purchasing property, Sukanya Smriddhi Yojana (SSY), National Savings Certificate (NSC), Senior Citizen Savings Scheme (SCSS), ULIPs, tax-saving FDs for five years, Infrastructure Bonds, and other investments are all eligible for deductions under section 80C.
Deduction for life insurance annuity plans under 80CCC
Under section 80CCC, contributions paid to annuity pension schemes are tax deductible. Taxes are required in the year in which the annual pension or amount paid at surrender is received, including any accumulated interest or bonus.
80CCD (1) NPS deduction
The contribution made by the employee under Section 80CCD (1) The following are the minimum permissible deductions as the maximum
- 10% of gross compensation (in case the taxpayer is an employee)
- 20& of the overall gross revenue (in case of self-employed)
- (U/S 80C allows a maximum of Rs. 1.5 lakh)
80CCD (1b) NPS Deduction
The amount placed into the NPS account is subject to an additional deduction of Rs 50,000.
Deductions are also permitted for contributions to the Atal Pension Yojana.
80CCD (2) NPS Deduction
Under this clause, employers’ contributions may be deducted up to 10% of the base pay plus the depreciation allowance. Only those receiving salaries are eligible for the benefits in this area; self-employed people are not.
What is the difference between Section 80C and 80CCC?
The main distinction between section 80C and section 80CCC is that under section 80C, the amount claimed for deduction may also originate from the portion of income exempt from taxation. But, to qualify for tax advantage under section 80CCC, the payment to the pension fund had to be made with money that was subject to tax. The section 80C deduction is also more inclusive, whereas the 80CCC deduction only applies to pension funds and annuity payments.
FAQ-Income Tax Section 80C, 80CCC
1. Is PPF under 80CCC?
Part of the more general 80 C category, Section 80CCC of the Income Tax Act of 1961, permits cumulative tax deductions up to Rs. 1.5 lakh per year for investments made in PPF, EPF/VPF, life insurance, recognized pension plans, etc. Investors may expressly claim tax deductions in place of pension fund payments under Section 80CCC.
2. Can I claim both 80CCC and 80CCD?
The cumulative deduction under Sections 80C and 80 CCD cannot exceed Rs 2 lakhs, and tax advantages received under Section 80CCD cannot be asserted again under Section 80C. The money that is received from NPS in the form of regular payments or surrendered accounts will be subject to taxes by the relevant laws.
3. What is the 80CCC deduction limit?
For expenses paid in purchasing a new pension plan or maintaining an existing policy that pays a periodic annuity or a pension, Section 80CCC allows tax deductions up to a maximum of Rs. 1.5 lakhs per year.
We all search for different strategies to lower our tax deductions and save money as taxpayers in India. Tax deductions under sections 80C, 80CCC, and 80CCD provide the benefit of lowering your taxable income and tax burden. Most of us are familiar with the concept of tax savings, but we often fail to implement it.
If you have any queries related Income Tax section 80C, 80CCC. Let us know in the comments.
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