Section 80CCC - Deductions on Contribution to Pension Fund (2024)

FAQs

Section 80CCC - Deductions on Contribution to Pension Fund? ›

Section 80CCC of the Income Tax Act of 1961 allows for annual deductions of up to Rs. 1.5 lakh for contributions made by an individual to designated pension plans provided by life insurance. The deduction is limited by Section 80C.

Section 80CCC of the Income Tax Act, 1961 is part of the broader 80 C category which allows cumulative tax deduction up to Rs. 1.5 lakh annually for investments made into PPF, EPF/VPF, life insurance, notified pension funds, etc.

Contributions are generally deductible only for the tax year when paid regardless of whether the employer uses the cash or accrual method of accounting, unless contributions in excess of the annual limits must be carried over to later years.

Section 80CCC deals with deductions that can be availed for contributions made towards annuity plans, pension plans eligible under Section 10(23AAB). Section 80CCD only pertains to deductions for the two plans offered by the Government of India, namely the National Pension Scheme (NPS) and Atal Pension Yojana (APY).

As a taxpayer, you can claim deductions under both Section 80C and 80CCC, but the total deduction for both cannot exceed INR 1, 50,000.

Section 80CCD and 80CCC are available in addition to deduction under section 80C however, the deduction under section 80C, 80CCC and 80CCD(1) in aggregate cannot exceed INR 1,50,000 as per 80CCE.

A pension fund, also known as a superannuation fund in some countries, is any plan, fund, or scheme that provides retirement income. Pension funds are pooled monetary contributions from pension plans set up by employers, unions, or other organizations to provide for their employees' or members' retirement benefits.

Taxes on Pension Income

You will owe federal income tax at your regular rate as you receive the money from pension annuities and periodic pension payments. But if you take a direct lump-sum payout from your pension instead, you must pay the total tax due when you file your return for the year you receive the money.

Benefits of Section 80CCD – 80CCD(1), 80CCD(2), 80CCC and 80C. *The limit of ₹1,50,000 deduction is inclusive of Section 80C, 80CCC and 80CCD(1) deductions. This means that a maximum of ₹ 1,50,000 can be claimed under all three sections combined. Section 80CCD(1B) deduction of up to₹ 50,000 is over and above this limit ...

Which retirement plan contributions is not tax-deductible? ›

Contributions to a traditional IRA are deductible, while contributions to a Roth IRA are not. » April 18, 2023, is the last day to file: Read our full list of federal income tax deadlines. Here's how to figure out if you qualify to deduct your traditional IRA contributions.

Gifts to a non-qualified charity or nonprofit are not deductible. To qualify, a group must register with the IRS under section 501(c)(3) or, in some cases, section 501(c)(4). A pledged or promised donation is not deductible, only money that is actually given.

In fact, you have the option to contribute a portion of each paycheck to your preferred retirement system. Moreover, some pension plans come with a voluntary investment component. If you have such a pension plan, you could contribute part of your current income from wages into a retirement investment plan.

Are 80C and 80CCC the same? Section 80C provides deductions on various investments up to ₹ 1.5 lakh per year from your taxable income. In comparison, Section 80CCC provides a deduction of up to ₹ 1.5 lakh per annum for the contribution made by an individual towards specified pension funds.

As an investor, investing this amount will make you eligible to claim ₹1,50,000 tax deduction under Section 80C and an additional ₹50,000 under Section 80CCD(1B). While there is no limit on the NPS maximum contribution per year, any investment above this threshold will not be eligible for tax deductions.

The maximum deduction limit available under Section 80CCD is Rs 2 lakhs; this includes the additional deduction of Rs 50,000 available under 80CCD (1B). Tax benefits availed under Section 80CCD cannot be claimed again under Section 80C, i.e. the combined deduction under Section 80C and 80CCD cannot exceed Rs 2 lakhs.

Your total investment upto 1.5 lakhs will only be allowed as deduction u/s 80C. The additional contributions do not have any problem from tax point of view, except that you cannot claim deduction u/s 80C on them.

It enables tax deduction under Section 80C: Fixed deposits allow tax saving under Section 80C. You can get tax deductions of up to ₹1, 50,000 under Section 80C of the Income Tax Act of 1961 for your investment in a fixed deposit.

Exclusive Tax Benefit to all NPS Subscribers u/s 80CCD (1B)

An additional deduction for investment up to Rs. 50,000 in NPS (Tier I account) is available exclusively to NPS subscribers under subsection 80CCD (1B). This is over and above the deduction of Rs. 1.5 lakh available under section 80C of Income Tax Act. 1961.

However, the total amount of deduction of 80 C and 80 CCD(1) cannot exceed Rs.1.50 lakhs in the previous year. Section 80 CCD (1B) gives an additional deduction of Rs.50,000 on their NPS contributions.

How is 80C deduction calculated? ›

You have the standard deduction of Rs 50,000 per year. You will then have to deduct the eligible expenses and investments under Section 80C. Suppose you have invested Rs 1.5 lakh in an ELSS fund. The taxable income reduces to Rs 9,00,000 – Rs 50,000 – Rs 1,50,000 = Rs 7,00,000.

An equity-linked savings scheme or ELSS is a mutual fund class that offers tax rebate under Section 80C of the Income Tax Act, 1961. You can claim tax deductions of up to Rs 1.5 lakh a year by investing in ELSS.

The Employee Retirement Income Security Act (ERISA) covers two types of retirement plans: defined benefit plans and defined contribution plans.

A pension fund is a retirement fund into which you and your employer contribute on a monthly basis. You can only join a pension fund through a company that employs you. Contributions made by you and your employer are tax deductible up to certain limits.

A pension plan is funded by the employer, while a 401(k) is funded by the employee. (Some employers will match a portion of your 401(k) contributions.) A 401(k) allows you control over your fund contributions, a pension plan does not.

Your pension contributions are deducted from your salary by your employer before income tax is calculated on it, so you get relief on the amount immediately at your highest rate of tax.

Lump-Sum Benefits

Unless you choose no withholding, a lump-sum benefit that is not an eligible rollover distribution, the taxation is 10% of the distribution.

Pensions are fully taxable at your ordinary tax rate if you didn't contribute anything to the pension. If you contributed after-tax dollars to your pension, then your pension payments are partially taxable. If the payments start before age 59 1/2, you may also be subject to a 10% early distribution penalty.

These income tax deductions sections are for investments made in a pension scheme notified by the central government. 80CCD (1) deals with the investment or contribution made by an employer to such a pension scheme whereas section 80CCD (2) deals with employer contribution to an employee's pension account.

The overall limit of deductions under 80C, 80CCC and 80CCD is Rs. 2 lakh, with an additional deduction of Rs. 50,000 allowed u/s 80CCD sub section 1B.

What is the limit of 80D? ›

For a person aged below 60 years, the limit for deduction under Section 80D is upto `25,000. The limit of `25,000 includes `5,000 on preventive health checkup. If the age of the insured is above 60 years, the limit for deduction increases upto `50,000.

In accordance with Section 80C of the Income Tax Act, 1961, mutual funds are not taxable. Only Equity Linked Savings Scheme (ELSS) mutual funds are exempt from this rule. The ELSS funds are tax-saving mutual funds that invest primarily in equities and are covered under Section 80C.

To claim deduction under Section 80GG, the taxpayer must file a declaration in Form 10BA. Form 10BA can be filed online by logging on to the Income Tax E-Filing website. In Form 10BA, the taxpayer must declare the amount of rent paid and the name of the landlord.

A tax saving FD is a type of fixed deposit in which the individual can claim a tax deduction under Section 80C of the Indian Income Tax, 1961. These deposits can be made through two types of accounts- Single holder Type Deposits and Joint holder Type Deposits.

A tax-saving fixed deposit (FD) account is a type of fixed deposit account that offers a tax deduction under Section 80C of the Income Tax Act, 1961. Any investor can claim a deduction of a maximum of Rs.1.5 lakh per annum by investing in a tax-saving fixed deposit account.

As per current tax laws an individual can claim a tax deduction for investments in tax saving fixed deposits of up to Rs. 1.5 lakh. The amount will be deducted from the total gross income of the individual to arrive at the taxable income. Section 80C of the Income Tax Act permits this deduction.

However, the total amount of deduction of 80 C and 80 CCD(1) cannot exceed Rs.1.50 lakhs in the previous year. Section 80 CCD (1B) gives an additional deduction of Rs.50,000 on their NPS contributions.

Check whether you are investing through SIP in a tax saving mutual fund scheme. If yes, you can claim tax deductions under Section 80C. If you are investing in any other open-ended equity schemes through SIP, you may not be able to claim any tax deductions on your investments.

Which SIP is tax-free under 80C? If you invest in an equity linked savings scheme, you can claim a tax deduction of up to maximum ₹1,50,000 in a financial year as per Section 80C of ITA. It will enable you to save the tax amount which will be instrumental in growing your corpus. Is tax saver SIP good?

ELSS is a type of Mutual Fund which allows you to claim for income tax deduction. You can save up to ₹ 1.5 lakhs a year in taxes by investing in ELSS, which is covered under Section 80C of the Income Tax Act, 1961.

What is the limit of 80GG deduction? ›

Maximum Deduction Limit Under 80GG of Income Tax Act

Under Section 80GG, you can claim up to ₹ . 60,000 per annum in case you have not received HRA at any time in a particular financial year.

The maximum deduction allowed under Section 80GG is Rs 60,000 per annum which means Rs 5000 per month. You cannot avail of the benefit of this section if house property is of your wife or minor child. To claim the benefit under this section needs to fill form 10 BA. Who can claim deduction under Section 80GG?

60,000 - as rent to your parents. However, your parents will have to show that amount as income in their income tax declaration. With the real estate rates nowadays, it is quite impossible that the least amount would be anything other than the limit of Rs. 60,000 allowed under Section 80GG.