Section 80CCC of the Income Tax Act, 1961 provides taxpayers with a provision for deductions up to Rs 1.5 lakhs in every financial year. This section includes the deductions due to investment in a new insurance policy or renewal of an existing policy. One of the primary pointers for availing the deductions under this section is that the plan should be providing a pension or a periodic annuity.
Taxpayers who have invested in a life insurance policy or paid for a renewal from their taxable income are eligible to avail deduction under Section 80CCC. Investment into an insurance policy should be made as per the terms of Section 10 (23AAB) from the accumulated funds. Bonuses received or interest accrued, is not eligible for deduction under Section 80CCC. Any amount received from the policy as a monthly pension is liable for taxation as per the prevailing rates. If the policy is surrendered, the amount would also be subject to taxation. Any amount deposited before April 2006 is not eligible for deduction.
Section 10 (23AAB)
Provisions in Section 80CCC and Section 10 (23AAB) are interlinked, as this section states that if a person invests in an insurance policy offered by Life Insurance of India (LIC) on or after August 1, 1996, or contributes to any pension plan offered by a recognized insurer, the contribution is eligible for deduction up to Rs 1.5 lakhs under Section 80CCC.
Eligibility for deductions under Section 80CCC
- A taxpayer who has invested in an insurance policy or a pension plan offered by a recognized insurer, is eligible for deductions under this section.
- Hindu Undivided Family (HUF) cannot claim deductions under Section 80CCC.
- Residents as well as non-residents are eligible to avail this deduction.
Key Point to Remember
- The deductions are applicable for the premium or sum paid for the preceding Assessment Year only.
- The maximum deduction which can be availed is Rs 1,50,000 in one financial year.
- The provisions under Section 80CCC are applicable to insurance providers in India that offer pension plans or annuity.
Taxpayers can avail this deduction under Section 80CCC while filing income tax returns.