When it comes to investment options that will help you claim tax deductions, Section 80CC, Section 80CCC and Section 80CCD have got it covered. Individuals or Hindu Undivided Families (HUFs) can claim a total of Rs. 1.5 Lakhs by investing in a combination of instruments under these sections.
Below is the list of investments that qualify for tax deductions under Section 80CC Income Tax Act.
- Tax Saving Fixed Deposits: Invest in these FDs to get the dual benefit of tax exemption and a high rate of returns. An ideal investment option for taxpayers who want to invest their money in low-risk instruments and save on taxes.
- PPF (Public Provident Fund): PPF is a popular option investment option under Section 80C. Since it is a government established savings scheme with a maximum duration of 15 years, your money is not only secure but also gets a guaranteed return. The interest earned on PPF is tax-free.
- ELSS Funds: ELSS or Equity Linked Saving Schemes can help you save on income tax deduction under section 80C.
- NSC (National Savings Certificates): NSC is yet reliable option to choose from under Section 80C deductions. The interest you earn falls under the limit of Rs 1.5 lakh.
- Life Insurance Premiums: If you make regular payments towards life insurance policies for yourself, your spouse or your children, you can claim deductions on the premiums
- Home Loan Repayment: Premiums paid towards the repayment of the principal amount on your home loan can be claimed for tax deductions
- Payment of tuition fees: Payment of tuition fees for yourself, your spouse or your children, is eligible for tax deductions under Section 80C of the Income Tax Act
- EPF (Employee Provident Fund): Investment in EPF by the employee is liable to tax deduction.
- Senior Citizens Savings Scheme: Investments made in SCSS can be claimed for tax deductions under section 80.
Section 80CCC of the Income Tax Act
Under Section 80CCC, individuals can claim tax deductions on investments made in pension plans offered by public or private sector insurers. Whether it’s buying a new policy or renewing an existing one, payments made towards such a fund are eligible for tax deductions. However, it’s essential to know that the final pension amount you receive as well as the interest and bonuses are taxable and hence cannot be claimed as tax deductions
The maximum tax deduction that you can claim under Section 80CCC is Rs. 1.5 Lakhs. This amount is clubbed with Section 80C and Section 80CCD.
Who is eligible for deductions under Section 80CCC?
- Individual taxpayers who have subscribed to an annual pension plan offered by approved insurance companies
- HUF or Hindu Undivided Families are not eligible for Section 80CCC deduction
- The above provisions apply to both Indian residents and NRIs
- According to Section 10 (23AAb), the amount to obtain the pension has to be paid from a particular fund.
Important things to know about Section 80CCC deductions
- Section 80CCC deduction can only be claimed if some payment towards purchase or renewal of pension plan has taken place
- The payment of the pension fund must happen from the accumulated funds as per Section 10 (23AAB) of the Income Tax Act
- The maximum deduction you can claim under Section 80CCC is Rs. 1,50,000. This is a cumulative amount which also includes deductions from Section 80C and Section 80CCD
- If for some reason the policyholder surrenders the policy, the amount received upon surrendering is taxable in its entirety
- All bonuses and interests received from the policy are taxable
Section 80CCD of the Income Tax Act
Under Section 8CCD of the Income Tax Act, 1961, contributions made to Pension plans offered by the Central Government are eligible for tax deductions. These are namely the National Pension Scheme (NPS) and the Atal Pension Yojana (APY).
Who is eligible for claiming tax deductions under Section 80 CCD?
- Resident Individuals, both salaried and self-employed can claim tax deductions under this section
- Citizens of India, including NRIs, can claim tax benefits under this scheme
- HUF (Hindu Undivided Families) are not eligible to claim tax deductions under Section 80CCD
- NPS is mandatory to the central government employees whereas for the others it is voluntary
- To claim tax deduction under NPS tier-1 account, individuals must contribute a minimum of Rs. 6000 per year or Rs. 500 per month
- To claim tax deduction under NPS tier-2 account, individuals must provide a minimum of Rs. 2000 per year or Rs. 250 per month
Section 80CCD has subdivisions for further clarity on the tax deductions that can be claimed under this section
- Section 80CCD (1) is related to the contribution made by the individual towards the NPS. Provisions under this section apply to individuals irrespective of whether they are government employee, private employee or self-employed. These provisions are also applicable to NRIs
- The deduction amount under this section is capped at 10% of the salary or 10% of the gross income of the individual
- This limit has been increased to 20% for self-employed individuals from FY 2017-2018
- Section 80CCD (2) is related to the employer’s contribution to the NPS on behalf of the employee. This contribution made by the employer is in addition to the one made towards PPF and EPF. Employers can contribute as much as the employee does or more. Under this section, employees can claim tax deductions up to 10% of their salary which includes basic pay and dearness allowance or matches the contribution made by their employer towards the NPS
With so many options to choose from, tax saving can get quite intense and overwhelming. The best way to deal with this is, plan your investments and look for options that work. With the many provisions available under Section 80C, Section 80CCC and Section 80CCD of the Income Tax Act, you can reduce your tax liability by a great deal.