Deduction under Section 80CCC, 80CCD & 80CCE
Maximizing Tax Benefits for Retirement and Savings

Exploring Deduction under Section 80CCC, 80CCD and 80CCE: A Complete Guide to TDS Compliance

Section 80CCC (Deduction in respect of contribution to certain pension funds)

Under Section 80CCC, the maximum permissible deduction is Rs.1,50,000 [Further, the overall limit of Rs. 1,50,000 prescribed in section 80CCE will continue to be applicable i.e. the maximum permissible deduction under sections 80C, 80CCC, and 80CCD(1) put together is Rs. 1,50,000].

This deduction will be applicable, 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 LIC of India or any other insurer for receiving a pension from the fund set up by LIC or such other insurer, he shall be allowed a deduction in the computation of his total income. 

For this purpose, the interest or bonus accrued or credited to the assessee’s account shall not be reckoned as a contribution.

Note: Where any amount paid or deposited by the assessee has been taken into account for the purposes of this section, a deduction under section 80C shall not be allowed with reference to such amount.

Deemed Income for this section means, any amount standing to the credit of the assessee in the fund in respect of which a deduction has been allowed, together with interest or bonus accrued or credited to the assessee’s account is received by the assessee or his nominee on account of the surrender of the annuity plan in any previous year or as pension received from the annuity plan, such amount will be deemed to be the income of the assessee or the nominee in that previous year in which such withdrawal is made or pension is received. It will be chargeable to tax as income from that previous year.

Further, this is to be noted importantly, that, if an individual opts for the New Tax Regime, the deduction under Section 80CCC will not be claimable.

Section 80CCD(Deduction in respect of contribution to pension scheme notified by the Central Government)

Section 80CCD provides deduction in respect of contributions made to the pension scheme notified by the Central Government. Accordingly, in the exercise of the powers conferred by section 80CCD(1), the Central Government has notified the ‘Atal Pension Yojana (APY)’ as a pension scheme, contribution to which would qualify for deduction under section 80CCD in the hands of the individual.

As per the “Restructured Defined Contribution Pension System” applicable to new entrants to Government service, it is mandatory for persons entering the service of the Central Government on or after 1st January 2004, to contribute 10% of their salary every month towards their pension account.

A matching contribution is required to be made by the Government to the said account. The benefit of this scheme is also available to individuals employed by any other employer as well as to self-employed individuals.

This is to be noted importantly, that, if an individual opts for the New Tax Regime, the deduction under Section 80CCD will not be claimable.

Amount of deduction

1. Section 80CCD(1) provides a deduction for the amount paid or deposited by an employee in his pension account subject to a maximum of 10% of his salary. The deduction in the case of a self-employed individual would be restricted to 20% of his gross total income in the previous year.
   
   
2. Section 80CCD(1B) provides for an additional deduction of up to Rs.50,000 in respect of the whole of the amount paid or deposited by an individual assessee under NPS in the previous year, whether or not any deduction is allowed under section 80CCD(1).
   
   
3. Whereas the deduction under section 80CCD(1) is subject to the overall limit of Rs 1,50,000 under section 80CCE (i.e., the maximum permissible deduction under sections 80C, 80CCC and 80CCD(1) put together is Rs.1,50,000), the deduction of upto Rs. 50,000 under section 80CCD(1B) is in addition to the overall limit of Rs. 1,50,000 provided under section 80CCE.
   
   
4. Under section 80CCD(2), the contribution made by the Central Government or any other employer in the previous year to the said account of an employee is allowed as a deduction in the computation of the total income of the assessee.
   
   
5. The entire employer’s contribution would be included in the salary of the employee. However, deduction under section 80CCD(2) would be restricted to 14% of salary, in case of a contribution made by the Central Government, and to 10% of salary, in case of a contribution made by any other employer. 

Deemed Income 

Section 80CCE (Limit on deductions under sections 80C, 80CCD, 80CCD(1)) 

The maximum deduction under this section is restricted to the aggregate amount of deduction under sections 80C, 80CCC, and 80CCD(1) to Rs. 1,50,000. It may be noted that the deduction of upto Rs. 50,000 under section 80CCD(1B) and the employer’s contribution to a pension scheme, allowable as a deduction under section 80CCD(2) in the hands of the employee, would be outside the overall limit of Rs. 1,50,000 stipulated under section 80CCE.

The following table summarizes the ceiling limit under these sections –

Example:

The gross total income of Mr. Girijesh for the A.Y.2022-23 is Rs.9,00,000. He has made the following investments/ payments during the F.Y.2021-22 

Compute the eligible deduction under Chapter VI-A for the A.Y.2022-23

Answer: Computation of deduction under Chapter VI-A for the A.Y.2022-23