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What is Section 80 CCH, Contribution to Agnipath Scheme?
Section 80CCH talks about ?Contribution to Agnipath Scheme?. This is a new Section introduced by the Finance Minister in the Finance Act, 2023 which is applicable with effect from Assessment year 2024-25.
To know about this Section it is of utmost importance to understand the Scheme first.
What is the Agnipath Scheme?
To attract young and talented individuals to the armed forces, the Indian Government launched the Agnipath scheme on June 14th, 2020. This program is open to individuals aged between 17.5 and 21 years, offering a tour-of-duty model where individuals are recruited as soldiers in the three branches of the armed forces. After a 4-year tenure, 25% of the "Agniveers" will have the opportunity to transition into regular armed forces roles.
Agniveers will earn approximately Rs. 4.76 lakh annually, with this amount increasing to Rs. 6.92 lakh in the final year. Additionally, allowances for ration, risk, hardship, travel, and other applicable benefits are provided, along with compensation in cases of death or disability.
Candidates are also eligible for the SevaNidhi, a sum they receive after completing the 4-year service. Agniveers must contribute 30% of their monthly earnings to the Agniveer corpus fund, with the government matching this contribution. The accumulated principal and interest over four years will result in a maturity corpus of around Rs. 10.04 lakh.
To ensure that all income under this scheme remains tax-free, Section 80CCH deductions have been introduced.
Which tax benefits are available Under Section 80CCH related to Agnipath Scheme?
Section 80CCH of the Income Tax Act specifies that both the contributions made by Agniveers and those made by the Central Government to the Agniveer Corpus Fund are eligible for tax deductions. This benefit applies to individuals who have joined the scheme on or after November 1, 2022.
Additionally, a new clause is proposed to be added to Section 10(12C), which would provide tax exemptions on the income received by Agniveer participants or their nominees under the scheme.
There are also recommendations to introduce a new sub-clause under Section 17(1), which would allow the Central Government's contributions from the previous financial year to be counted as part of the Agniveer's salary. This would enable candidates to claim tax benefits under Section 80CCH.
Furthermore, the government has proposed tax exemptions under Section 115 BAC for the Central Government?s contributions, benefiting individuals opting for the new tax regime.
These changes took effect on April 1, 2023, and will remain applicable in future assessment years.
The Income Tax Return (ITR) forms (ITR 1 and 4) for AY 2024-2025 have been updated to allow individuals to disclose the amount eligible for deduction under Section 80CCH.
What are the eligible deductions under Section 80CCH for the Agniveer Corpus Fund?
Individuals can claim a full deduction for the amount they contribute to the Agniveer Corpus Fund, but this deduction is available only under the old tax regime.
Additionally, the entire contribution made by the Central Government to the Agniveer Corpus Fund on behalf of the individual is eligible for a deduction. This deduction applies under both the old and new tax regimes.
Important Note: Individuals opting for the new tax regime cannot claim a deduction on their contributions to the Agniveer scheme.
What is the tax exemption for corpus fund receipts under section 80CCH?
The amount received from the Agniveer corpus fund after completing four years of service is exempt from tax under section 80CCH.
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