Limit of deduction under 80CCC raised
Budget 2015-16 – Raising the limit of deduction under 80CCC
Existing Provision:-
Under the existing provisions contained in sub-section (1) of the section 80CCC, an assessee, being an individual is allowed a deduction upto one lakh rupees in the computation of his total income, of an amount paid or deposited by him 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 a fund set up under a pension scheme.
Reason for amendment:
In order to promote social security, it is proposed to amend sub-section (1) of the said section so as to raise the limit of deduction under section 80CCC from one lakh rupees to one lakh and fifty thousand rupees only, within the overall limit provided in section 80CCE.
Period for which income is eligible for deduction:
This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years. This means income earn in previous year 2015-16 and subsequent year is eligible for higher deduction.
Note On Relevant Clauses Of Finance Bill 2015
Clause 16 of the Bill seeks to amend section 80CCC of the Income-tax Act relating to deduction in respect of contribution to certain pension funds.
Under the existing provisions contained in sub-section (1) of the aforesaid section, an assessee, being an individual is allowed a deduction up to one lakh rupees in the computation of his total income, of an amount paid or deposited by him 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 a fund set up under a pension scheme.
It is proposed to amend sub-section (1) of the said section so as to raise the limit of deduction from one lakh rupees to one hundred and fifty thousand rupees.
This amendment will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent years.
EXTRACT OF RELEVANT CLAUSES FROM FINANCE BILL 2015
Amendment of section 80CCC
In section 80CCC of the Income-tax Act, in sub-section (1), for the words “one lakh rupees”, the words “one hundred and fifty thousand rupees” shall be substituted with effect from the 1st day of 25 April, 2016.
Analysis:
Even after pension scheme limit in revised upwards, there may not be major benefits to individual tax payers. The overall cap of investment under sec 80C and 80CCC is still one lakh and fifty thousand rupees only.
The only benefit is to risk averse investor who are looking for comfortable old age life. Now area of choice shifted mere from PPF of pension if one desires so. Now whether you invest in PPF or pension scheme, you will get same tax treatment.