What is Section 80-CCC?

Updated on : Aug. 25, 2022 - 4 p.m. 17 min read.

Section 80CCC Income Tax Act, 1961 allows individuals to claim tax deductions for the contribution made towards certain pension plans. The objective of this provision is to encourage individuals to save for their retirement, and also to reduce their tax liability by claiming deductions for such contributions.

Under section 80CCC, an individual can claim a deduction for the amount contributed towards an annuity plan of a life insurance company. The annuity plan must be for receiving a pension from the individual's employer or any other source after retirement. The maximum deduction that can be claimed under this section is Rs. 1.5 lakhs per financial year.

The Section 80CCC exemption includes the money spent on the purchase of a new policy or payments made towards the renewal or continuation of an existing policy.

Section 80CCC is read along with Section 80C and Section 80CCD (1), thereby limiting the total exemption to Rs. 1,50,000/- per annum.

Terms and Conditions of Section 80-CCC:

  1. Available to those individuals who have paid the sum for renewal or purchase of a life insurance policy from their taxable income.
  2. The payment of funds from the policy should be made as per the terms of Section 10 (23AAB) from the accumulated funds.
  3. If any bonuses are received or interest is accrued, it is not eligible for deduction under Section 80CCC.
  4. Any amount received from the policy as a monthly pension is liable for taxation as per the prevailing rates.
  5. If the policy is surrendered, the amount would also be subject to taxation.
  6. Any rebates that were available on investment in annuity plans before April 2006 are not allowed under Section 88.
  7. Any amount deposited before April 2006 is not eligible for deduction.

Eligibility for Deduction Under Section 80-CCC:

  1. An individual taxpayer who has subscribed to an annuity plan which has been offered by an approved insurance company.
  2. These provisions apply to both residents as well as non-residents.

Important Points Related to Section 80-CCC:

  1. The maximum available deduction under this Section is Rs. 1,50,000/- per annum.
  2. The deduction limits available under Section 80CCC are clubbed together with Section 80C and Section 80CCD (1) to determine the total deduction limit available.
  3. The provisions of Section 80CCC are specifically applicable to those insurance providers in India that offer annuity or pension plans. The insurer could be a public Section or entity or a private Section or entity as well.
  4. The deductions are applicable for the premium/sum paid for the preceding Assessment Year only. For instance, if an individual pays the sum for 2-3 years together, then a deduction can only be claimed for the amount that pertains to the preceding year only.

Section 10(23AAB)- interlinked with Section 80-CCC:

The provisions of Section 10 (23AAB) are inherently linked with Section 80CCC. It relates to the income earned from a fund that has been set up by a recognized insurer, including the LIC.

The fund must have been set up before August 1996 as a pension scheme. The contributions made by the taxpayer to the policy must have been with the intention of earning pension income in the future.