80CCC Deductions in respect of contribution to certain Pension Funds

By | November 7, 2014
Income Tax Act, 1961 provides for various types of deductions for the assessee. These deductions can be claimed by the assessee while computing his total income and corresponding tax liability. Some of such deductions available to the assessee are given under Chapter VI-A in the said act. These deductions get reduced from the total income of the assessee, thus providing relief to them. All these deductions are subject to certain conditions which must be complied with, by the assessee, in order to avail any such deduction. Deduction under section 80CCC , 80C,80CCD and 80CCF are some of the most important deductions for an individual and HUF.
Section 80 CCC of the Income Tax act, 1961 deals with one such deduction in relation to the contribution made by the assessee being an individual towards various annuity plans of Life Insurance Corporation of India or any other insurer for receiving annuity or pension by an assessee after his retirement. I can also tell you how to make money of 1 Crore in 10 years

Assessee Eligible for Deduction
The Deduction under section 80CCC is available only to individuals. Here, individuals also include non-resident individuals. The wording of section 80 CCC starts as follows “Where an assessee being an individual……”. This implies that only individuals are eligible for deduction under this section.
Contribution must be out of Income chargeable to tax
Another condition is that the contribution in respect of which the deduction is to be claimed by the assessee must have been paid by the out of the income chargeable to tax of such assessee.
Deduction is available is respect of contribution towards annuity plan.
As per the provisions of section 80CCC, where an assessee pays or deposits, in any previous year, any amount out of his income chargeable to tax towards any annuity plan of Life Insurance Corporation of India or any other insurer as specified in clause (23AAB) of section 10 in order to receive pension from such Pension Fund, then he shall be entitled to a deduction for the amount paid or deposited by him in such funds while computing his total income. However, such amount of deduction shall not exceed One Lac rupees in any previous year.

Amount of Deduction under Section 80 CCC
Total amount of deduction under section 80 CCC along with the amount of deduction available under section 80 C and section 80 CCD shall not exceed One Lac Rupees in any circumstance. In case, the deduction has been allowed to the assessee under this section, he shall not be allowed to claim deduction under section 80 C for the same amount paid towards any annuity plan.
Pension Received or amount received on surrender of any annuity plan shall be taxable. As per the provisions of section 80 CCC, in case any assessee or his nominee receives any amount (including Interest or bonus) from the pension fund in relation to which deduction has been allowed under section 80 CCC:
on account of the surrender of the annuity plan, whether in whole or in part in any previous year; or
as pension from the annuity plan;
Then such amount shall form a part of the total income of the assessee or his nominee in the year of receipt and will be subject to tax.
Thus, no exemption is available in relation to the amount received as pension or on account of surrender of such annuity plans for which deduction has already been allowed under section 80 CCC(1).
For example, Mr. A, who is earning a monthly income of Rs. 70000, plans to make an investment in the annuity schemes of various pension funds so as to claim tax deduction under section 80CCC. He buys one annuity plan of LIC whose premium is Rs. 15000 p.a. and another annuity plan of Bajaj Allianz Life Insurance whose premium amounts to Rs. 25000 p.a. In such scenario, he shall be eligible for a deduction of Rs.40000 (Rs. 15000+25000) every year till he pays the premium. After 15 years, he surrenders the policy of Life Insurance Corporation of India and receives Rs. 360000. Now, this surrender value shall be taxable in the year of receipt. And the amount received from the other annuity scheme at the time of maturity shall be taxable then as pension. There is also a system to find out how many years do you need to make 10 times

No Deduction/ Rebate under any other Section
In case, any amount paid or deposited by the assessee has been taken into consideration for the purposes of this section, no rebate/ deduction in relation to such amount shall be allowed under section 88 up to assessment year 2005-06 and under section 80C from assessment year 2006-07 onwards.

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