Section 80CCF of the Income Tax Act Explained

section 80ccf of income tax act — (Source: shardaassociates.in)

Developing an infrastructural facility in a country requires substantial funds, and the Government seeks potential investors to meet this financial requirement. Section 80CCF is a provision introduced in the Income Tax Act to attract such willing investors by providing certain tax incentives against investing in Government-backed infrastructure and other tax-saving bonds.

This provision is ideal for both investors and the Government, as the former can maximise their savings and reduce tax liability. At the same time, the latter can obtain the funds required to develop infrastructure and promote economic growth.

If you are willing to know more about this section, keep scrolling!

What Is the Deduction Limit Under Section 80CCF?

Section 80CCF has been introduced to allow individuals to enjoy additional tax deductions over and above those mentioned under 80C. Eligible individuals can claim a maximum deduction of ₹ 20,000 in a given assessment year as specified under Section 80CCF of the Income Tax Act. Investors can add this deduction with other available deductions, thus maximising savings on tax.

What Are the Eligibility Criteria to Avail Tax Benefits Under Section 80CCF?

Individuals need to meet the following eligibility parameters to enjoy tax benefits under Section 80CCF of the Income Tax Act:

An Indian resident qualifies to avail tax benefits under this Section.
Individuals and Hindu Undivided Families can enjoy tax deductions. No companies, organisations, or firms are eligible to avail tax deductions under Section 80CCF of the Income Tax Act.
An individual can invest in government-approved infrastructure bonds jointly with another investor. However, only the primary stakeholder can claim tax deductions.
Investors need to invest in infrastructure bonds issued by the Industrial Financial Corporation of India, Life Insurance Corporation, Integrated Infrastructure Finance Company and government-backed NBFCs.
Only adult taxpayers can claim tax benefits under Section 80CCF.

What Are the Documents Required to Avail Tax Benefits Under Section 80CCF?

Investors need to furnish the following documents to claim tax deduction under Section 80CCF:

PAN card
Government-approved identity proof
Details of bank account (if required)

How to Calculate Deductions Under Section 80CCF of Income Tax Act?

To understand how does income tax deduction under Section 80CCF works, let's take a simple example:

Mr Ashok earns a annual income of ₹ 5,00,000. According to the income tax slab, his taxable income equals ₹ 2,50,000. He invests in schemes to avail tax deduction up to ₹ 1,50,000 as mentioned under Section 80C. Besides, he invests ₹ 40,000 in government-approved bonds and can enjoy a tax deduction of ₹ 20,000 under Section 80CCF. Thus, his total taxable income in a given assessment year stands to -

Particulars	Amount
Annual income	₹ 5,00,000
Deduct: Taxable income	- ₹ 2,50,000
Deduct: Deduction under Section 80C	- ₹ 1,50,000
Annual Net taxable income	₹ 1,00,000
Investment in government-backed bonds	₹ 40,000
Deduct: Maximum deduction under section 80ccf (deduct from investment in government-backed bonds)	- ₹ 20,000
Total taxable income of Mr. Ashok in a given assessment year (₹ 1,00,000 - ₹ 20,000)	₹ 80,000

Things to Consider While Availing Tax Benefits Under Section 80CCF

Keep the following pointers in mind before claiming tax benefits under Section 80CCF of the Income Tax Act:

The interest made from government-approved infrastructure and other tax-saving bonds is taxable.
These bonds have a tenure above 5 years. In most cases, the lock-in period of these bonds is 5 years. After the expiry of this lock-in period, individuals may sell these bonds.
Individuals can invest through Demat or physical form.
Investors can invest in multiple bonds, but the maximum deduction limit in an assessment year will remain the same.
Only one member in a Hindu Undivided Family can enjoy tax benefits under this Section.

Thus, go through these pointers about Section 80CCF carefully. Doing so will streamline the process of availing tax benefits and reduce tax liabilities under this section.

Frequently Asked Questions

✓ When did this Section 80CCF come into effect?

Section 80CCF was presented in the 2010 Budget session and came into effect in 2011.

✓ Is Section 80CCF of the Income Tax Act a part of 80C?

Yes, 80CCF is a sub-section of 80C of the Income Tax Act.