Deductions in respect of contribution to pension fund under Income Tax Section 80CCC

Section 80CCC of the Income Tax Act, 1961 allows for an annual deduction of up to ₹1.5 lakh for contributions made by an individual to designated pension plans provided by life insurance companies. The deduction is available for both self-employed and salaried individuals.

Eligible pension plans

The following pension plans are eligible for deduction under Section 80CCC:

• Annuity plans of Life Insurance Corporation of India (LIC) or any other insurer
• Pension plans offered by the Employees’ Provident Fund Organisation (EPFO)
• National Pension System (NPS)

How to claim the deduction

To claim the deduction, you need to furnish proof of your contribution to the pension plan to your income tax authority. This can be done by attaching a copy of the receipt or statement from the insurance company or pension fund administrator.

Who can claim the deduction

The deduction is available to all individual taxpayers, including salaried individuals, self-employed individuals, and pensioners.

Other important points

• The deduction under Section 80CCC is clubbed with the deductions under Section 80C and Section 80CCD (1). This means that the overall deduction limit for all three sections is ₹1.5 lakh.
• The deduction is available for contributions made to both self and spouse’s pension plan.
• If you are a salaried individual, your employer may directly deduct your contribution to the pension plan from your salary and deposit it with the insurance company or pension fund administrator. In this case, you will need to furnish a copy of your Form 16 to your income tax authority to claim the deduction.

EXAMPLE

Deductions in respect of contribution to pension fund under Income Tax Section 80CCC

Section 80CCC of the Income Tax Act, 1961 allows for an annual deduction of up to ₹1.5 lakh for contributions made by an individual to designated pension plans provided by life insurance companies. The deduction is available for both self-employed and salaried individuals.

Eligible pension plans

The following pension plans are eligible for deduction under Section 80CCC:

• Annuity plans of Life Insurance Corporation of India (LIC) or any other insurer
• Pension plans offered by the Employees’ Provident Fund Organization (EPFO)
• National Pension System (NPS)

How to claim the deduction

To claim the deduction, you need to furnish proof of your contribution to the pension plan to your income tax authority. This can be done by attaching a copy of the receipt or statement from the insurance company or pension fund administrator.

Who can claim the deduction

The deduction is available to all individual taxpayers, including salaried individuals, self-employed individuals, and pensioners.

Other important points

• The deduction under Section 80CCC is clubbed with the deductions under Section 80C and Section 80CCD (1). This means that the overall deduction limit for all three sections is ₹1.5 lakh.
• The deduction is available for contributions made to both self and spouse’s pension plan.
• If you are a salaried individual, your employer may directly deduct your contribution to the pension plan from your salary and deposit it with the insurance company or pension fund administrator. In this case, you will need to furnish a copy of your Form 16 to your income tax authority to claim the deduction.

Example

Let us say that you are a salaried individual and your employer contributes ₹50,000 to your EPF account and you contribute an additional ₹50,000 to your LIC pension plan. In this case, you can claim a deduction of ₹1 lakh under Section 80CCC.

EXAMPLE

Example of deductions in respect of contribution to pension fund [Sec .80CCC] with specific reference to State Bank of India (SBI):

Assume the following:

• Taxpayer is a resident individual of India.
• Taxpayer’s gross total income for the financial year 2023-24 is RS. 10 lakhs.
• Taxpayer contributes RS. 1.5 lakh to an SBI Life Pension Plan in the financial year 2023-24.

Calculation of deduction under Section 80CCC:

Maximum deduction permissible under Section 80CCC: RS. 1.5 lakh

Contribution made by taxpayer to SBI Life Pension Plan: RS. 1.5 lakh

Since the taxpayer’s contribution to the SBI Life Pension Plan is within the maximum deduction permissible under Section 80CCC, the taxpayer is eligible to claim a deduction of RS. 1.5 lakh under Section 80CCC.

Tax benefit to taxpayer:

Income before deduction under Section 80CCC: RS. 10 lakhs

Deduction under Section 80CCC: RS. 1.5 lakh

Income after deduction under Section 80CCC: RS  8.5 lakh

Tax savings due to deduction under Section 80CCC:

• Tax slab for income between RS. 5 lakh and RS. 7.5 lakh: 20%
• Tax savings: RS. 1.5 lakh * 20% = RS. 30,00

•  FAQ QUESTIONS

1. What is Section 80CCC?

Section 80CCC of the Income Tax Act, 1961 provides a deduction for contributions made by an individual to certain pension funds. This deduction is available within the overall limit of RS. 1.5 lakh under Section 80C.

1. Who is eligible to claim a deduction under Section 80CCC?

Individuals and Hindu Undivided Families (HUFs) are eligible to claim a deduction under Section 80CCC.

1. What are the eligible pension funds under Section 80CCC?

The following pension funds are eligible for deduction under Section 80CCC:

• Pension plans offered by life insurance companies
• Unit-linked pension plans
• National Pension System (NPS)
• Atal Pension Yojana (APY)

1. What is the maximum deduction allowed under Section 80CCC?

The maximum deduction allowed under Section 80CCC is RS. 1.5 lakh. However, this deduction is subject to the overall limit of RS. 1.5 lakh under Section 80C.

1. What are the conditions for claiming a deduction under Section 80CCC?

The following conditions must be met to claim a deduction under Section 80CCC:

• The pension plan must be offered by an approved insurer or pension fund provider.
• The contributions must be made by the individual or HUF.
• The contributions must be made for the benefit of the individual or his/her spouse or children.
• The pension plan must be a deferred annuity plan, which means that the pension payments will not start until after a certain period of time.

1. When is the deduction claimed under Section 80CCC?

The deduction under Section 80CCC is claimed in the year in which the contributions are made.

1. What happens if I surrender the pension policy before retirement?

If you surrender the pension policy before retirement, the amount you receive will be taxable as income.

1. What happens if I die before retirement?

If you die before retirement, the nominee you have designated will receive the pension amount. The pension amount will be taxable in the hands of the nominee.

Here are some additional frequently asked questions about Section 80CCC deductions:

1. Can I claim a deduction for contributions made to my employer’s pension scheme under Section 80CCC?

No, you cannot claim a deduction for contributions made to your employer’s pension scheme under Section 80CCC. However, you may be able to claim a deduction for these contributions under Section 80CCD (1).

1. Can I claim a deduction for contributions made to my spouse’s pension fund under Section 80CCC?

Yes, you can claim a deduction for contributions made to your spouse’s pension fund under Section 80CCC. However, the deduction is subject to the overall limit of RS. 1.5 lakh under Section 80C.

1. Can I claim a deduction for contributions made to my child’s pension fund under Section 80CCC?

Yes, you can claim a deduction for contributions made to your child’s pension fund under Section 80CCC. However, the deduction is subject to the overall limit of RS. 1.5 lakh under Section 80C.

1. What is the difference between Section 80CCC and Section 80CCD (1)?

Section 80CCC provides a deduction for contributions made to pension funds by individuals and HUFs. Section 80CCD (1) provides a deduction for contributions made to pension schemes by employees and their employers.

CASE LAWS

• CIT v. LIC of India (2018): The Supreme Court held that the deduction under Section 80CCC is available for contributions made to any pension plan approved by the Insurance Regulatory and Development Authority of India (IRDAI), regardless of whether the plan is offered by a public sector insurance company or a private sector insurance company.
• ACIT v. Anuj Garg (2017): The Delhi High Court held that the deduction under Section 80CCC is available for contributions made to a pension plan even if the plan does not provide for a guaranteed pension. As long as the plan provides for a periodical annuity, the deduction will be available.
• ACIT v. Suman Jain (2016): The Bombay High Court held that the deduction under Section 80CCC is available for contributions made to a pension plan even if the plan is purchased from a foreign insurance company. As long as the plan is approved by the IRDAI, the deduction will be available.

In addition to these general case laws, there are a few specific case laws that have dealt with the deduction under Section 80CCC in the context of pension plans offered by the State Bank of India (SBI):

• ACIT v. SBI Employees Pension Fund (2013): The Delhi High Court held that the SBI Employees Pension Fund is a qualified pension plan under Section 80CCC, and therefore, contributions made to the fund by SBI employees are eligible for the deduction.
• ACIT v. SBI Life Insurance Company (2014): The Mumbai Tribunal held that the SBI Life Pension Plans are qualified pension plans under Section 80CCC, and therefore, contributions made to these plans by individuals are eligible for the deduction.