We learn the value of making plans for the future and making financial investments from a very early age. As we become older and earn money, we look at the many retirement-related insurance options. Investing in them is much more profitable when we get advantages from such programmes both now and in the future.

Tax advantages consistently rank among the most highly regarded benefits of any term insurance policy or retirement plan. The Income Tax Act of 1961's Section 80CCC must be included in any discussion of tax-saving measures in India.

The Section 80CCC deduction includes the cost of new insurance and payments made toward its renewal or continuance. However, the life insurance policy on which the money is being spent must provide a pension or periodic annuity to qualify for this deduction.

When read in conjunction with Sections 80C and 80CCD (1), Section 80CCC reduces the annual exemption cap to ₹1,50,000.

Your 80CCC limit is thus not ₹1,50,000 by itself. Sections 80C and 80CCD must be read in conjunction with this restriction (1). The combined investment limit for all three sections—80C, 80CCD (1), and 80CCC - is ₹1,50,000.

The combined income tax deduction for these two investments is merely ₹1,50,000 since ULIPs are tax deductible under Section 80C, and annuities are tax deductible under Section 80CCC.

Some of the characteristics and restrictions of the Section 80CCC deduction are as follows:

• The life insurance policy must have been funded to earn a pension after retirement.
• A specific fund must be used to pay the pension, according to Section 10 (23AAB). This covers any annuity plans offered by a life insurance firm as well as any other pension plan authorised and registered by the Insurance Regulatory and Development Authority of India (IRDAI).
• It's crucial to remember that you may only deduct for the year the pension was paid for. Put another way; if you make a one-time payment, you may only deduct taxes for that year, not the plan’s term. However, if you make regular premium payments, like yearly ones, you may claim tax deductions yearly.
• You will be taxed on the pension you get as taxable income.
• If you surrender the insurance, the surrender value is taxed at the source.
• A Hindu Undivided Family is not eligible for the exemption under Section 80CCC (HUF).
• A total of Rs. 2 lakhs (Rs. 1,50,00,000 under Section 80C and an additional Rs. 50,000 under Section 80CCD (1B) for investments in either the National Pension Scheme or the Atal Pension Yojana) may be deducted under Sections 80CCC, 80C, and 80CCD (1) when all three deduction limitations are combined.

To be eligible for deductions, the following prerequisites must be satisfied:

• Only invest in a pension plan that offers annuities at maturity if you wish to take advantage of the Section 80CCC deduction.
• The pension plan acquired from the life insurance firm must have the Insurance Regulatory and Development Authority of India's approval to qualify for the tax deduction (IRDAI).
• Because they are not considered "individual taxpayers," associations, businesses, partnerships, sole proprietorships, Hindu Undivided Families (HUFs), or any other taxpayer cannot claim 80CCC deductions.
• These rules apply to everyone, inhabitants and non-residents alike.
• Each year, income tax returns must be filed to collect the Section 80CCC tax deduction. Only the Financial Year (FY) in which the investment payments were made is eligible for this deduction.
• The deduction amount that may be made cannot be more than the person's total taxable income.
• The Policy funds must be paid out from the Accumulated Funds by Section 10 (23AAB).
• If bonuses are obtained, or interest is accumulated, Section 80CCC does not permit deductions (collected).
• Any money received from the insurance as a monthly pension is taxable at the current tax rates.
• The amount the firm pays out if the insurance is relinquished will also be taxed.
• Refunds on investments in annuity plans made before April 1, 2006, are not permitted under Section 88.
• A deduction under Section 80C is not permitted for funds deposited before April 1, 2006.

In essence, you will be contributing every month to your pension plan. The amount of money will build up over time. The accumulated (collected) corpus will be delivered to you when you achieve adulthood. Additionally, the annuity will only be paid out of this corpus.

According to income tax regulations, the money you receive as an annuity is taxable. The income tax bracket you fall into will determine the applicable tax rate specified by the Income Tax Act.

Section 80CCC and Section 10 (23AAB) stipulate are inextricably intertwined. It has to do with the earnings from a fund established by a reputable insurer, such as the LIC.

The fund must be established as a pension plan before August 1996. The taxpayer's payments to the policy had to be made to generate pension income in the future.

There are two critical distinctions between Section 80C and Section 80CCC:

• The first and most significant one is that, under Section 80C, a portion of the claimed deduction amount may be derived from non-taxable income. The contribution to the pension fund must, however, be made from taxable income to qualify for the tax advantages under Section 80CCC of the Income Tax Act.
• The fact that Section 80C offers a range of tax-deductible expenditures and costs is the second significant distinction between Section 80C and Section 80CCC. While Section 80CCC only applies to donations made to pension funds or annuities.

As a result, Section 80CCC enables you to claim a sizable tax deduction if you invest in a pension or annuity plan, both of which are long-term and have strict lock-in periods.

You may manage your tax savings more wisely and save more for your necessities and desires by taking note of Section 80CCC's requirements. You must pick your investing strategies while keeping your short- and long-term financial objectives in mind.