What is the Difference Between Section 80C and 80CCD?

For the economic growth of our country, the citizens must pay their income tax accurately and on time. It is the responsibility of every Indian citizen, to fulfil their obligations. However, the Income Tax Act of 1961 provides several provisions that allow deductions against investments made in specific areas or schemes. 

Similarly, two such popular options are the deductions under Section 80C and Section 80CCD. In the article, we share the difference between both the sections and the deductions. 

What is the Section 80C?

Section 80C of the Income Tax Act is like a golden key for reducing your taxable income and putting some extra money back in your pocket. Under the scheme, you will get multiple ways to save the tax through less taxable income. 

The deductions are allowed for life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc. 

By providing the details of income and expenses, you can claim a deduction of upto Rs. 1.5 lakh in a financial year. For instance, if your taxable income in the financial year 2023-24 is Rs. 10 lakhs. And, you claim the deduction under 80C for Rs. 1.5 lakh, which means your taxable income is reduced to Rs. 6.5 lakh. Understanding the points for filing an income tax is necessary for every assessee. 

Which Type of Deductions are Allowed Under Section 80C?

The deductions allowed for the taxpayers - Individual or Hindu Undivided Family (HUF) are as follows:

To calculate the total income of an assessee, being an individual or a Hindu undivided family. The income is deducted, as per the provisions of Section 80C. The whole amount paid or deposited in the previous year is the aggregate of the sums referred to in sub-section (2).

• Life insurance premium paid - Premium for yourself spouse and children.
• Deposit in provident fund/superannuation fund.
• Investment in fixed deposit/Bonds - Five years fixed deposit eligible for section 80C.
• Investment in NSC.
• Tuition fee for two children.
• Repayment of housing loan (principal component).
• Stamp Duty/ Registration fees/ other expenses for purchase/ construction of residential house.
• Investment in mutual fund/UTI eligible for Section 80C.
• Other investment/payment eligible for Section 80C.

What is Section 80CCD?

In Section 80CCD, the deductions are available to individuals regarding contributions to the pension scheme of the Central Government.

However, the assessee, being an individual employed by the Central Government on or after the 1st day of January 2004. Any other assessee, being an individual who has in the previous year paid or deposited any amount in his account under a pension scheme. Who has notified or as notified by the Central Government, he shall, in accordance with, and subject to, the provisions of this section. Allow a deduction in the computation of his total income, of the whole of the amount so paid or deposited as does not exceed

Types of Deductions Under Section 80CCD

The following are the types of deductions under the section 80CCD:

• Section 80CCD(1): This deduction applies to the contributions made by an individual (employee or self-employed) towards their pension account in a recognized scheme. The maximum deduction is 10% of their salary (basic + dearness allowance) or 10% of their gross income, in case they are self-employed.
• Section 80CCD(1B): The additional deduction offers an extra deduction of up to Rs. 50 thousand and above the limit under Section 80CCD(1). This deduction is specifically for the National Pension Scheme (NPS).
• Section 80CCD(2): This section focuses on the contribution made by the employer towards an employee’s pension account in a recognised scheme. This maximum deduction is 10% of the employee’s salary (basic + dearness allowance).

Important Points to Check in Section 80CCD

The combined deduction under Section 80CCD(1), 80CCD(1B), and 80CCD(2) cannot exceed the limit of Rs. 2 lakh in the financial year. However, the contribution to NPS is also claimed under Section 80C. But remember the total deduction under both sections cannot exceed Rs. 1.5 lakh. 

In addition, if you withdraw from a pension scheme before the specified age (usually 60 years). This section provides a valuable incentive to save the retirement and secure your financial future. In this situation, you can consult with an expert to maximise the deductions and choose the best pension scheme as per your needs.

Difference Between Section 80C and Section 80CCD in India

Conclusion

To conclude, the assessee must know about income tax. This helps them reduce their taxable income, here we only share two sections, and both offer valuable tax benefits. Connect with Registrationwala, to file your income tax return in 2024, we assist you in saving tax in this financial year. The Government has introduced a new tax regime, and there are different ways through which you can less down your income and its tax. 

Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.