Section 80CCF Income Tax Deduction

Section 80CCF of the Income Tax Act is a provision which benefits investors by providing tax deductions for Government approved infrastructure bond schemes. It was formulated in the year 2010 and came into force in 2011. The Income Tax Department has re-introduced the deduction to encourage investments in the infrastructure projects of the nation, as well as to reduce the taxpayers' liabilities. In this article, we briefly discuss the provisions of Section 80CCF. The Government of India wants to encourage investment level in infrastructure bonds with the intention of developing the overall infrastructure of the nation. Thus, Section 80CCF of the Income Tax Act is a beneficial provision for investors. It provides a way to invest in Government bonds and save tax liabilities.

What is Section 80CCF?

Chapter VI-A of the Income Tax Act deals with the provisions related to deductions that are available while calculating the Gross Total Income. Thus, Section 80C has a comprehensive list of deductions. Section 80CCF of the Income Tax Act is a subsection of Section 80C that provides the taxpayer with a deduction on the amount invested in specific Government approved infrastructure bonds. This section enables the taxpayer to avail a deduction of upto Rs. 20,000 per year on total taxable income.

Government Approved Infrastructure Bonds

The Government approved infrastructure companies will issue bonds with a decent rate of interest, added with tax benefits. The tenure of bonds should be a minimum of ten years and a lock-in period of five years. The interest income earned through these bonds will be added to the income from other sources.

Eligibility for Tax Deduction

Only the residents of India can claim tax benefits under Section 80CCF of the Income Tax Act. It is not applicable to NRIs and Foreigners.
The deduction is only provided to an individual and not for companies, firms, and organisations.
Only one person of a Hindu Undivided Family can claim the deduction.
Two or more people can make a joint investment; however, only the primary stakeholders can avail the deduction.
Tax benefits can be claimed only through investment in particular tax saving bonds of Government approved banks or corporations.

Required Documents

The following documents must be furnished by those who wish to claim the benefits under Section 80CCF of the Income Tax Act:

A valid government approved ID proof
Bank details
PAN Card details

Example

Section 80CCF of the Income Tax Act can only be applied to certain investments. For example, 25-year-old Ramya is an engineer, earning a salary of Rs. 5 lakh per year. As per the income tax slabs, she needs to pay tax on amounts exceeding Rs. 2.5 lakh, i.e., if her taxable income is above Rs. 2.5 lakh. To reduce her tax burden, she invests in a number of schemes which provide deduction under Section 80C. She invests a total of Rs. 1.5 lakh, i.e., her taxable income is Rs. 1 lakh now ( Rs. 2.5 lakh - Rs. 1.5 lakh ). To save more tax, she invests a sum of Rs. 30,000 in an infrastructure bond offered by a reputed bank. Now, Rs. 20,000 out of the Rs. 30,000 invested can be deducted under Section 80CCF, thereby reducing her total taxable income to Rs. 80,000 ( Rs. 1,00,000 - Rs. 20,000 ), helping her save a considerable amount on overall tax.

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