Income Tax Deduction under Section 80C, 80CCD and 80CCC

Friday 12 January 2018

The Income Tax Act of 1961 has 298 Sections and XIV Schedules. Under the provisions of the Act, Indian citizens and companies can avail of the tax deductions under Section 80C, 80CCD, 80CCC, 80CCCE, to save tax by investing upto 1.5 lakh in different options. The different deductions all suit unique investment and tax savings needs.  For your knowledge, you should also be aware of other deductions available like Medical insurance (Section 80D), Education Loan (Section 80E), Interest on Housing Loan (Section 24), Disability and Disease (Section 80U).

Section 80C

80C came into force with effect from 1st April, 2006. Section 80C provides deductions for savings for deduction under income tax and their limits. Section 80C enables tax payers to claim a deduction of Rs 1,50,000 from total income. Claimants can include individuals or a Hindu Undivided Family (HUF).  For those who have paid excess taxes and made suitable investment in LIC, PPF, Mediclaim, and expenses incurred towards tuition fees etc., filing Income Tax Return will enable people to get a refund.

Section 80CCC

Section 80CCC of the Income Tax Act provides an Income tax exemption for payments and deposits made for any annuity plan of LIC or any other insurer.  The plan must enable the insured to receive pension from a fund referred to in Section 10(23AAB), upon surrender of the annuity, including interest or bonus accrued on the annuity, taxable in the year of receipt.

Section 80CCD

Section 80CCD covers deduction for employee contribution to pension account. The maximum deduction that can be claimed under 80 CCD is 10 percent of salary (in case the taxpayer is an employee) or 10% of gross total income (for self employed taxpayers) or Rs 1, 50,000, whichever is less. Financial year  2017-18 onwards, self-employed individuals can claim a maximum deduction of 20% of gross salary instead of 10% (earlier subject to a maximum of Rs1, 50,000).

It must be noted that combined maximum limit for section 80C, 80CCC and sec 80CCD (1) deduction is Rs 1, 50,000. For self contribution, deduction for NPS – section 80CCD under a new section (1B) for an additional deduction of up to Rs 50,000 can be made for the amount deposited by a taxpayer towards NPS. Eligibility also extends to Atal Pension Yojana. There is also additional deduction for employer’s contribution to employee’s pension account (EPF) of up to 10% of the salary of the employee, without any monetary ceiling on this deduction.

Additionally, you can also claim tax benefits of donating to charity

Your taxable income can be calculated as (Total Income) minus (Donated Amount), generating a net income, on which the income tax is now calculated, based on the prevailing tax rate.  However, while filing for donation tax return, you must be cognizant of the fact that many donations only permit 50% deduction on the donation made, and only donations under Section 80GGA or 35AC provide 100% rebate on the entire amount donated. These apply to sums up to 10% of your taxable income, after deductions, capital gains, income exempt from tax, and Section 10 deductions.

Conclusion

Indians have begun to increasingly donate to NGO fundraising, understanding the impact of civil society in making a difference to society. NGOs like Save the Children are known for their high standards of ethics, transparency, and ability in channelising donation funding towards relief work. The NGO has brought tens of thousands of children out of poverty, ill health and exploitation.  The NGO’s child-centric projects in 18 states give communities access to essential services like healthcare and education, and enabling them to access social protection schemes and life-saving aid during disasters.