In Budget 2023, our honorable finance minister Nirmala Sitharaman announced the addition of section 80CCH to the Income Tax Act, 1961. The main objective is to provide tax deduction to Agnipath scheme. Before getting into the provisions of tax deduction as specified under section 80CCH, let us understand what agnipath scheme is.
Our Indian Government launched Agnipath scheme in the year 2020 to induct young and talented individuals into the armed forces.
One of the eligibility of these individuals is to contribute to the Agniveer corpus fund. In order to get Sevanidhi, which is a sum receivable after completion of 4 years of job tenure, each individual is required to contribute 30% of their monthly salary to the Agniveer corpus fund.
Central government will also contribute an equal amount as contributed by the individual to the Agniveer corpus fund, which will get added to the individual’s account.
Applicants at the end of the tenure will get the accumulated amount with interest. In order to make all income from this agniveer corpus fund tax-free, section 80CCH has been introduced.
Tax deduction under section 80CCH for Agnipath Scheme
Section 80CCH of the Income tax act, 1961, is applicable from financial year 2022-23 (assessment year 2023-24).
Here are the two conditions one must satisfy in order to get tax deduction under section 80CCH;
- The assessee must be an individual enrolled in the Agnipath Scheme.
- Such assessee has subscribed to the Agniveer Corpus Fund on or after 1st November 2022.
If both the conditions are satisfied, then contribution by the assessee to the Agniveer corpus fund is deductible under section 80CCH in the year in which the amount is paid or deposited
Contribution by the central government will also be allowed as tax deduction after including the amount as income under the head Salaries. Which means, first include the central government’s contribution to salary income then take deduction.
As per the provisions of section 80CCH, total contribution to the agniveer corpus fund is tax deductible.
Moreover, the government has also introduced another section 10(12C) to exempt the receipts from the ‘Agniveer Corpus Fund’. This means, receipts from the Agniveer corpus fund by a person enrolled under the Agnipath scheme shall be exempt from tax under Section 10(12C).
Please note, central government contribution to the Agniveer Corpus Fund is tax deductible under section 80CCH in both old as well as new tax regime.
This means, tax deduction under section 80CCH for the contribution made by the central government for the benefit of the applicant can be claimed even if the assessee has opted to pay tax as per the new tax regime under section 115BAC.
