Deductions Under Section 80CCF – Is It A Win-Win Situation For All?
23 May 2022
The Government of India encourages its citizens to participate in infrastructure building and boost economic progress. The lion’s share of these required funds comes from taxpayers. However, the Government also encourages traders and investors to participate in nation-building. Contributions from shares and investments help meet these requirements. To enable investors to continue functioning with ease, Section 80CCF Of Income Tax provisions incentives to investors. However, the validity of these bonds has now been terminated.
What is Section 80CCF of the Income Tax Act?
This scheme provides tax benefits to investors. It lists certain tax benefits and provides additional deductions that investors can enjoy. This results in a win-win situation for both parties.
Section 80C provides a list of deductions. The sub-section Section 80CCF allows deductions on government-approved infrastructure bonds. Investors can enjoy deductions up to Rs. 20,000 on their total taxable income.
Deductions under Section 80CCF of Income Tax Act 1961
Under this scheme, investors can avail of tax benefits on investments in infrastructure and other tax-saving bonds in Demat form/physical bonds. Benefits under Section 80CCF of the Income Tax Act 1961 include tax deductions on bonds issued by LIC, Industrial Financial Corporation of India and other Non-banking financial institutions.
Additionally, bonds eligible for deductions under Section 80CCF should be on the tenure of 10 years or more (5 years lock-in period). Interest from these investments is, however, taxable.
Eligibility for Tax Deduction under Section 80CCF of Income Tax
To be eligible for deductions under Section 80CCF, an individual must be:
An Indian individual (companies and organisations are not eligible)
Member of Hindu Undivided Family (only one member is eligible)
Joint investors in infrastructure bonds (only one member is eligible)
Investing in assorted tax-saving bonds issued by banks or other institutions
Applicability of Section 80CCF of the Income Tax Act
Deductions under Section 80CCF apply to an individual’s net income, thus reducing his/her taxable income. Mr Pankaj’s annual income of Rs. 5 lakhs warrants income tax on Rs. 2.5 lakhs (no tax payable till Rs. 2.5 lakhs).
Now, he invests Rs. 1.5 lakhs in schemes that carry deductions under section 80C. Thus, his taxable income now amounts to Rs. 1 lakh. Then, he chooses to invest Rs. 40,000 in an infrastructure bond issued by SBI. Under section 80CCF, deductions apply to Rs. 20,000. Thus, his net taxable income stands at Rs. 80,000.
Documents Required for Tax Deduction under Section 80CCF of Income Tax
The income tax department wants investors willing to enjoy deductions under section 80CCF to present certain documents. These include-
Any valid government ID viz., Aadhaar card, Voter ID, Driving license, etc.
Valid bank details
PAN card details
Key Points to Remember about Section 80CCF of Income Tax
The deduction scheme under this section of the Income Tax Act is applicable for long term investment bonds. Deductions under Section 80CCF apply to all Indian residents and not NRIs. Thus it is not applicable for companies or partnerships, etc.
Typically, the issuance of infrastructure bonds under Section 80CCF of the Income Tax Act is subject to owning Demat accounts. However, they can also allot such bonds without it. Investors should give at least 2-3 days to let the allotment process happen.
FAQs on Section 80CCF
Q1. What are the eligibility criteria for purchasing infrastructure bonds?
Ans: Any adult individual who is an Indian resident and/or is a member of a Hindu Undivided Family is eligible to purchase infrastructure bonds and enjoy tax deductions up to Rs. 20,000.
Q2. What are the benefits of infrastructure bonds?
Ans: In comparison to other bonds, infrastructure bonds are easier to handle since they carry lower risks. The quality assessment ensures that these bonds are ranked according to their profit generation capacity. Additionally, they are relatively more liquid since they are listed on stock markets.
Q3. Can infrastructure bonds be used to issue loans?
Ans: Bonds under Section 80CCF Of Income Tax cannot be used to avail loans. However, they can be kept as security after the lock-in period.
Q4. What is the procedure for applying to infrastructure bonds?
Ans: Assesses can apply to infrastructure bonds with a valid Demat account. However, he/she needs to keep his/her PAN Card details ready. For physical purchases, investors should produce their identity proofs. These bonds carry a maturity period of 10 years.
Q5. Is investing in infrastructure bonds a good option for new investors?
Ans: These bonds are less risky as compared to customarily traded bonds. Plus, the government encourages investors to invest in these bonds.
Before you go…
Looking for instant 🚀 personal loans 24*7 anywhere, anytime? Get personal loans up to ₹20 lakh starting at 9.9% p.a. Install the Navi app now!!
Or, maybe you’re looking to buy that house you’ve been eyeing 🏠 and you need a loan of up to ₹5 crore. Install the Navi app now and get instant in-principle approval right away! Interest rates starting at 8.39% p.a.
How about an affordable health insurance policy👨⚕️ starting at a monthly premium of just ₹235? Install the Navi app now and get your policy in under 2 minutes.
Instead, want to put your savings into action and kick-start your investment journey 💸 But don’t have time to do research. Invest now with Navi Nifty 50 Index Fund, sit back, and earn from the top 50 companies.
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
Vikram Kirloskar Origins – From Bicycle Repair Shop to Toyota
Facial Recognition-based Entry System in Airport Launched. Know More!
15 Best Christmas Gift Ideas Even Santa Wouldn’t Ignore
RBI Launches Digital Rupee – Is it Like Crypto?
The G.O.A.T. – Messi’s 7 Life-Changing Quotes You Can’t Ignore
Mercedes or SIPs – Indians Tweet Their First Choice
How to Open Demat Account: Fees, Eligibility, Documents
Udd Gaye Totey: 9 Funny Tweets that Got Indians ROFL
10 Best Places to Celebrate New Year 2023 in India
We are a diverse group of writers, editors and Subject Matter Experts striving to bring the most accurate, authentic and trustworthy finance and finance-related information to our readers. Our mission is to simplify jargon and industry lingo. We believe sharing knowledge through relatable content is a powerful medium to empower, guide and shape the mindset of a billion people of this country.
Section 115BAA of Income Tax Act
The Government of India brought in multiple amendments to the Income Tax Act of 1961 through the Ta...Read More »
Best Tax Saving SIPs in 2023: 10 ELSS Funds You Can Consider Investing In Through SIPs
SIP or Systematic Investment Plan is one of the most effective tax-saving instruments. You can clai...Read More »
Professional Tax: 2023 Slab Rates, Exemptions & Applicability In India
Professional tax in India is levied on anyone who is employed. From professionals such as accountan...Read More »
What is Profit After Tax and How is it Calculated? Why is it Important for Companies?
An essential step for all organisations is to ensure that they continuously monitor the amounts of ...Read More »
What is Accounting Equation – Meaning, Formula and Calculation with Example
Regardless of the size of the company, financial statements are created using a basic accounting eq...Read More »
Cost Inflation Index: What is CII and How is it Calculated?
The price of commodities rises over time, reducing the purchasing power of money, which is the numb...Read More »
What is White-Collar Crime and What is the Penalty?
White shirts, black coats and well-ironed ties are typical stereotypes representing the rich and el...Read More »
Form 12B – Its Significance in Income Tax and How to fill it
When you join a new company in the middle of a financial year, you must complete several formalitie...Read More »
What is Cash Memo, Its Benefits and How to Create It?
All transactions in accounting must have accurate documentation as proof of financial trail. Docume...Read More »
What is Condonation of Delay in Law? What are its General Principles?
As per the Indian law, there is a certain time frame to submit all forms and applications to the Re...Read More »
Foreign Exchange Management Act (FEMA): Its Regulations and Penalties
Import and export are essential components of the aggregate trade that occurs in India. Import-expo...Read More »
What is Withholding Tax? What are its Rates? How is it Different from TDS?
The Central government of India levies income tax, a type of direct tax, on the income of individua...Read More »
Diwali 2022: Diwali Holidays – The Festival of Lights
The ‘Festival of Lights’ is one of the biggest and most anticipated festivals in India. This is...Read More »
Best Index Funds – Top 20 Index Funds in India
Index funds replicate the performance of a stock market index, such as the Sensex or Nifty 50 to ge...Read More »