Monday 27 February 2012

80 CCC. Contributin to Pension Funds


Deduction in respect of contribution to certain pension funds.

80CCC. (1) Where an assessee being an individual has in the previous year paid or deposited any amount out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India 70[or any other insurer] for receiving pension from the fund referred to in clause (23AAB) of section 10, he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income, of the whole of the amount paid or deposited (excluding interest or bonus accrued or credited to the assessee’s account, if any) as does not exceed the amount of ten thousand rupees in the previous year.
(2) Where any amount standing to the credit of the assessee in a fund, referred to in sub-section (1) in respect of which a deduction has been allowed under sub-section (1), together with the interest or bonus accrued or credited to the assessee’s account, if any, is received by the assessee or his nominee—
             (a)   on account of the surrender of the annuity plan whether in whole or in part, in any previous year, or
             (b)   as pension received from the annuity plan,
an amount equal to the whole of the amount referred to in clause (a) or clause (b) shall be deemed to be the income of the assessee or his nominee, as the case may be, in that previous year in which such withdrawal is made or, as the case may be, pension is received, and shall accordingly be chargeable to tax as income of that previous year.
(3) Where any amount paid or deposited by the assessee has been taken into account for the purposes of this section, a rebate with reference to such amount shall not be allowed under section 88.]
The following sub-section (3) shall be substituted for the existing sub-section (3) of section 80CCC by the Finance Act, 2005, w.e.f. 1-4-2006 :
(3) Where any amount paid or deposited by the assessee has been taken into account for the purposes of this section,—
              (a)   a rebate with reference to such amount shall not be allowed under section 88 for any assessment year ending before the 1st day of April, 2006;
              (b)   a deduction with reference to such amount shall not be allowed under section 80C for any assessment year beginning on or after the 1st day of April, 2006.

A short note on section 80CCC of Income Tax Act 1961


Section 80CCC of Income Tax Act 1961 deals with the deductions and income in respect of contributions to certain Pension funds by an individual assessee. Here below the relevant provisions of section 80CCC are discussed.
 
To whom the deduction is available u/s 80CCC: The deduction u/s 80CCC is available to an individual assessee only as the wording of section 80CCC(1) starts as “Where an assessee being an individual…..”. Thus its only the individual who is eligible for deduction u/s 80CCC. The deduction under this section is also available to a non resident individual.
 
The amount must have been paid out of income chargeable to tax: Another condition for claiming deduction u/s 80CCC is that the amount of contribution paid in respect of which deduction has to be claimed, must have been paid out of the income chargeable to tax of the concerned individual assessee.
 
Deduction is available in respect of contributions made towards annuity plan for receiving pension: The deduction u/s 80CCC is available only in respect of contributions made to effect or keep in force a contract for any annuity plan of Life insurance Corporation of India or any other insurer for receiving pension from the fund referred to in clause 23AAB of section 10.
 
Thus in simple words contributions made towards pension plans of LIC or other insurers are eligible for deduction u/s 80CCC.
 
Amount of Deduction: The amount of deduction u/s 80CCC together with deduction available u/s 80C, 80CCD cannot exceed more than Rs. 1 Lakh. Where deduction has been allowed u/s 80CCC, deduction u/s 80C will not be available in respect of the payment towards such annuity plan.
 
Pension received from or amount received on surrender of such annuity pension plan is taxable: Section 80CCC(2) provides  if the assessee or his nominee receives any amount (including Interest or bonus), standing to the credit of the assessee in respect of which deduction u/s 80CCC has been allowed to him:
 
(a)on account of the surrender of the annuity plan, whether in whole or in part in any previous year; or
 
(b)   as pension from the annuity plan; such amount shall be included in the total income of the assessee or his nominee in the year of receipt.
 
Thus there is no exemption available on the amount received as pension or on surrender in case of such annuity plans of pension in respect of which deduction u/s 80CCC(1) has been allowed.

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