S. 80CCC of the Income Tax Act, 1961 allows deduction in respect of contributions to certain Pension Funds by an individual assessee. It was introduced so as to encourage taxpayers to invest in pension funds and secure their future. S. 80CCC does not limit itself only to resident individuals and therefore non-resident individuals contributing to pension funds can also claim deduction u/s 80CCC. This deduction is only available to an individual taxpayer and not to HUF.
Conditions for claiming deduction u/s 80CCC:
1. The amount should be deposited or paid out of Taxable Income.
2. No deduction u/s 80C is allowed on investment or expenditure if the same is claimed u/s 80CCC.
3. The maximum amount deductible u/s 80C is Rs. 1, 00,000 and also the total amount of deduction u/s 80C, 80CCC and 80CCD in aggregate is Rs. 1, 00,000.
4. Surrender value received is taxable in the year of receipt in the hands of the assessee or the nominee.
5. If deduction is claimed u/s 80CCC, pension received will be taxable in the hands of the assessee or the nominee in the year of receipt.
An additional deduction upto a maximum of Rs. 20,000/- will be available from A.Y. 2011-12 (F.Y. 2010-11) for investment in Infrastructure Bonds.
As per S. 80CCC, where an assessee being an individual has in the previous year paid or deposited any amount out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India or any other insurer for receiving pension from the Fund referred to in clause (23AAB) of S. 10, he shall, in accordance with, and subject to the provisions of this section, be allowed a deduction in the computation of his total income, of the whole of the amount paid or deposited (excluding interest or bonus accrued or credited to the assessee’s account, if any) as does not exceed the amount of Rs. 1 Lakh in the P.Y.
Limit- Deduction shall exclude interest or bonus accrued or credited to the employee’s account, if any and shall not exceed Rs. 1 lakh and The aggregate amount of deduction u/s 80C, 80CCC and sub section (1) of S. 80CCD shall not exceed Rs. 1,50,000/- (S. 80CCE).
Limit of deduction u/s 80CCC is enhanced to Rs. 1.50 from Rs. 1 Lakh with effect from A.Y. 2016-17 and for subsequent assessment years. This increase in deduction was announced by the Finance Minister Arun Jaitley in budget 2015.
Reference:
As Per Section 80CCC, of the Income Tax Act, 1961-
Deduction in respect of contribution to certain pension funds.
(1) Where an assessee being an individual has in the previous year paid or deposited any amount out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India [or any other insurer] for receiving pension from the fund referred to in clause (23AAB) of section 10, he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income, of the whole of the amount paid or deposited (excluding interest or bonus accrued or credited to the assessee’s account, if any) as does not exceed the amount of[one lakh] rupees in the previous year.
(2) Where any amount standing to the credit of the assessee in a fund, referred to in sub-section (1) in respect of which a deduction has been allowed under sub-section (1), together with the interest or bonus accrued or credited to the assessee’s account, if any, is received by the assessee or his nominee—
(a) on account of the surrender of the annuity plan whether in whole or in part, in any previous year, or
(b) as pension received from the annuity plan,
an amount equal to the whole of the amount referred to in clause (a) or clause (b) shall be deemed to be the income of the assessee or his nominee, as the case may be, in that previous year in which such withdrawal is made or, as the case may be, pension is received, and shall accordingly be chargeable to tax as income of that previous year.
[(3) Where any amount paid or deposited by the assessee has been taken into account for the purposes of this section,—
(a) a rebate with reference to such amount shall not be allowed under section 88 for any assessment year ending before the 1st day of April, 2006;
(b) a deduction with reference to such amount shall not be allowed under section 80C for any assessment year beginning on or after the 1st day of April, 2006.]