The taxability and benefit of amount contributed to pension funds or pension scheme is dealt in Section 80CCC and 80CCD. Since both the sections are interrelated to a certain extent, taxpayers are finding it difficult to comprehend the difference between the provisions underlying in both the sections.

Primary Difference:

Section 80CCC provides deduction in respect of amount contributed towards any annuity plan of the LIC of India or any other insurer covered under relevant section. Section 80CCD provides deduction in respect of contribution to pension scheme notified by Central Government.

Provisions of Section 80CCC:

• The amount of pension received at the time of maturity or in case of withdrawal prior to maturity (by assessee himself or his/ her nominee) will be taxable in the year of receipt, in the hand of the assessee or his/her nominee, as the case may be, if deduction has been claimed under this section at the time of contribution.
• The deduction is allowed only if such amount is paid or deposited by the taxpayer out of his income chargeable to tax and the amount paid or deposited under the said annuity plan will not include interest or bonus accrued or credited to the assessee’s account.
• The maximum amount deductible under section 80CCC is Rs.100000. Moreover, the aggregate amount of deduction under section 80C, 80CCC and 80CCD, shall be restricted to the overall limit of Rs.100000.

Provisions of Section 80CCD:

• This section covers both salaried and non-salaried individual. But it primary discusses the tax treatment of the amount contributed by the employee / other individuals and employer in the pension scheme.
• Deduction for employee’s contribution is available subject to a maximum of 10% of salary. In case of self employed individual, the contribution limit is restricted to 10% of gross total income.
• Also the deduction shall be allowed within the aggregate ceiling limit of Rs.100000 taking into account deductions u/s 80C, 80CCC and 80CCD.
• Employers’ contribution is also subject to the said limit of 10% of salary. It is important to note that employer’s contribution shall not be counted for computing the overall limit of Rs.100000. However, no deduction is available in respect of employer’s contribution which is in excess of 10 percent of the salary of the employee. Employer’s contribution will be fully taxable in the hand of employee as perquisite. Thereafter the employee can claim deduction for the same under 80CCD.

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