Section 80CCA Income Tax Deduction: Eligibility, Limit & Withdrawal Tax Rules (FY 2025-26)

Section 80CCA of the Income Tax Act provides deduction for payments made towards National Savings Scheme (NSS) deposits and specified LIC deferred annuity plans. This section is primarily relevant for legacy deposits, as deductions for NSS deposits made after 1 April 1992 are not allowed. If you hold old NSS deposits or eligible annuity payments made before this cutoff date, you can claim tax deduction under this section. This comprehensive guide covers eligibility criteria, deduction limits, withdrawal taxation rules, and practical examples for FY 2025-26.

What is Section 80CCA?

Section 80CCA falls under Chapter VI-A of the Income Tax Act, 1961, and provides tax deduction for specific savings schemes and annuity plans. This section specifically covers contributions to National Savings Scheme (NSS) deposits and Life Insurance Corporation (LIC) deferred annuity plans that meet prescribed conditions.

Key Point: Section 80CCA deduction is now applicable only in limited cases, as deposits made to NSS after 1 April 1992 do not qualify for this deduction. Only pre-1992 deposits remain eligible for tax benefits under this section.

Who Can Claim Section 80CCA Deduction?

Section 80CCA deduction can be claimed by individuals and Hindu Undivided Families (HUF). Companies, partnership firms, and other business entities are not eligible for this deduction. This benefit was specifically designed for resident taxpayers who invested in the specified schemes.

When is Section 80CCA Useful?

In today's context, Section 80CCA is rarely applicable for most taxpayers, as very few individuals hold NSS deposits made before 1 April 1992. However, this section remains relevant if you have:

Old NSS deposits (made before 1 April 1992) with pending maturity
LIC deferred annuity plans that meet the eligibility criteria
Legacy investments that fall within the scope of this section

If you hold any of these investments, you can claim tax benefits under Section 80CCA.

Eligibility Criteria and Key Conditions

To claim deduction under Section 80CCA, certain specific conditions must be satisfied. Here are the detailed eligibility criteria and important conditions:

Eligible Taxpayers

Individual: Salaried employees, self-employed professionals, or any individual taxpayer
HUF: Hindu Undivided Families can also claim if they hold eligible deposits
Residential Status: Generally applicable to resident individuals and HUFs (specific rules may apply for NRIs)

Critical Cutoff Date

Important Limitation: Deposits made to National Savings Scheme (NSS) after 1 April 1992 do NOT qualify for deduction under Section 80CCA. Only deposits made on or before 1 April 1992 are eligible for this tax benefit.

Eligibility Checklist

Use this checklist to verify your eligibility for Section 80CCA deduction:

Identify the Scheme/Deposit Type
- National Savings Scheme (VIII Issue) deposits
- Specified LIC deferred annuity plans
Verify the Deposit Date
- For NSS deposits: Must be made on or before 1 April 1992
- Post-1992 deposits are not covered under Section 80CCA
Collect Supporting Documents
- NSS Passbook or Certificate
- LIC Premium Payment Receipts
- Deposit slips and acknowledgment documents
- Bank statements (if applicable)
Confirm Genuine Payment
- Payment made through cash or valid banking channels
- Receipts properly documented and verifiable

Deduction Limit Under Section 80CCA

The deduction limit under Section 80CCA is linked to the overall ceiling of Section 80C. Under the Income Tax Act, Chapter VI-A deductions have combined limits that apply across multiple sections.

Particulars	Details
Maximum Deduction (80CCA)	Actual deposit/payment amount (subject to 80C ceiling)
Combined 80C Ceiling (FY 2025-26)	₹1,50,000 (80C + 80CCC + 80CCA together)
Applicable Tax Regime	Old Tax Regime only (Chapter VI-A deductions not available in New Regime)

Important: The combined limit of Section 80C, 80CCC, and 80CCA is ₹1.5 lakh. This means if you have already claimed ₹1.5 lakh under Section 80C, you cannot claim any additional deduction under Section 80CCA.

How to Claim Section 80CCA Deduction

The process to claim Section 80CCA deduction is straightforward:

Claiming Under Old Tax Regime

ITR Filing: Enter Section 80CCA deduction in the "Deductions under Chapter VI-A" section of your Income Tax Return
Specify Amount: Mention the actual deposit/payment amount (keeping the overall limit in mind)
Maintain Documents: Keep NSS passbooks, LIC receipts, and certificates ready for verification if required

For Salaried Employees

Submit Investment Proofs: Provide investment proof documents along with Form 12BB to your employer
TDS Adjustment: Your employer will consider this deduction while calculating TDS on salary
Verify Form 16: Check your year-end Form 16 to ensure the declared deductions are correctly reflected

For Self-Employed/Business Owners

Claim the deduction directly while filing your Income Tax Return
Maintain proper entries in your books of accounts
Keep all proofs and certificates filed securely for future reference

Taxation on Withdrawal or Receipt

An important aspect often overlooked by taxpayers is the taxation of amounts received on withdrawal or maturity of deposits for which Section 80CCA deduction was claimed earlier. Understanding these tax implications is crucial for proper tax planning.

General Taxation Rules

When you withdraw NSS deposits or receive LIC annuity, bonus, or surrender value, the following taxation rules apply:

Taxable in Year of Receipt: The entire withdrawal/receipt amount is treated as income in the financial year when you receive it
Income Classification: Taxed under the head "Income from Other Sources"
Applicable Tax Rate: Taxed according to your income tax slab rate for that year

Withdrawal Taxation: If you claimed Section 80CCA deduction at the time of deposit, the entire maturity/withdrawal amount (including both principal and interest) becomes fully taxable upon receipt.

Recent Updates (Finance Act 2025)

According to recent amendments, exemption provisions have been introduced for NSS withdrawals under specific conditions:

Effective Date: Applies to withdrawals made after 29 August 2024 (in certain cases)
Eligible Category: Individual taxpayers meeting specific criteria
Exemption Scope: Partial or full exemption available on a case-by-case basis

However, this exemption applies only in limited circumstances. Consult with your CA or tax advisor to confirm whether your withdrawal qualifies for this exemption.

TDS on Withdrawal

Tax Deducted at Source (TDS) under Section 194EE applies to NSS withdrawals:

TDS Rate: Generally 10% (if PAN is provided)
Threshold: TDS applicable as per scheme provisions
TDS Credit: You can claim credit for TDS deducted while filing your Income Tax Return

Practical Examples

Example 1: Pre-1992 Eligible Deposit with Withdrawal

Scenario:

Mr. Sharma deposited ₹50,000 in National Savings Scheme (NSS) in March 1991. He claimed Section 80CCA deduction of ₹50,000 in his FY 1991-92 Income Tax Return.

Maturity in FY 2025-26:

The deposit matured in February 2026, and Mr. Sharma received ₹2,80,000 (including principal and accumulated interest).

Tax Treatment:

Original Deduction: ₹50,000 deduction claimed in FY 1991-92 under Section 80CCA
Withdrawal (FY 2025-26): Entire ₹2,80,000 is taxable under "Income from Other Sources"
TDS Deduction: Bank/Post Office will deduct 10% TDS under Section 194EE
ITR Filing: Mr. Sharma must report ₹2,80,000 as income in FY 2025-26 ITR and pay tax according to his applicable slab rate

Example 2: Post-1992 Deposit (Not Eligible)

Scenario:

Ms. Verma deposited ₹75,000 in National Savings Scheme (NSS) in June 1995.

Tax Treatment:

Deduction Status: Ms. Verma cannot claim Section 80CCA deduction because the deposit was made after 1 April 1992
Alternative Options: She should explore deductions under Section 80C (PPF, ELSS, NSC, etc.) or other available tax-saving options
Withdrawal Taxation: Upon maturity, only the interest portion will be taxable (since no deduction was claimed on principal)

Recommendation: For deposits made after 1 April 1992, consider other Chapter VI-A deductions available under sections like 80C, 80CCD, or 80D for tax planning.

Section 80CCA vs Section 80C: Key Differences

Aspect	Section 80CCA	Section 80C
Scope	Limited to NSS (pre-1992) and specified LIC annuities	Broad range: PPF, ELSS, NSC, Life Insurance, Home Loan Principal, etc.
Eligibility Date	NSS deposits only before 1 April 1992	No such date restriction
Applicability Today	Rarely applicable (legacy deposits only)	Widely used by all taxpayers
Maximum Limit	Part of combined ₹1.5 lakh limit	₹1.5 lakh (combined with 80CCC, 80CCA)
Investment Options	Very limited (specific schemes only)	Multiple investment options available

Frequently Asked Questions (FAQs)

Q1: Who can claim deduction under Section 80CCA?

Only individuals and Hindu Undivided Families (HUF) can claim deduction under Section 80CCA. Companies, partnership firms, and other entities are not eligible for this deduction.

Q2: Can I claim Section 80CCA deduction for NSS deposits made after 1 April 1992?

No, deduction under Section 80CCA is not available for NSS deposits made after 1 April 1992. Only deposits made on or before this date qualify for the deduction. For post-1992 investments, consider Section 80C deductions.

Q3: Is withdrawal from NSS deposits taxable?

Yes, if you claimed Section 80CCA deduction on the deposit, the entire withdrawal amount (principal plus interest) is fully taxable in the year of receipt under "Income from Other Sources." TDS at 10% is usually deducted under Section 194EE.

Q4: Where do I show Section 80CCA deduction in my Income Tax Return?

Section 80CCA deduction should be shown in the "Deductions under Chapter VI-A" section of your ITR form. Enter the eligible amount in the designated field for Section 80CCA. This deduction is only available under the Old Tax Regime.

Q5: What is the maximum deduction limit under Section 80CCA?

The maximum deduction is the actual amount deposited, subject to the combined ceiling of ₹1,50,000 under Sections 80C, 80CCC, and 80CCA together. If you've already exhausted the ₹1.5 lakh limit under Section 80C, no additional deduction is available under 80CCA.

Q6: Can I claim Section 80CCA under the New Tax Regime?

No, Section 80CCA and other Chapter VI-A deductions (except Section 80CCD(2)) are not available under the New Tax Regime. You must opt for the Old Tax Regime to claim this deduction.

Q7: What documents are required to claim Section 80CCA deduction?

You need to maintain NSS passbook or certificate, deposit receipts, LIC premium receipts (for annuity plans), and payment proof. These documents should be kept ready for verification by tax authorities if required.

Q8: What is the difference between Section 80CCA and Section 80C?

Section 80CCA is specific to NSS deposits made before 1 April 1992 and certain LIC annuity plans, while Section 80C covers a broad range of investments like PPF, ELSS, NSC, life insurance premiums, home loan principal, etc. Section 80C is more widely applicable today.

Important Points to Remember

Section 80CCA is a legacy provision with limited applicability in current times
Only pre-1 April 1992 NSS deposits qualify for this deduction
The deduction limit is part of the combined ₹1.5 lakh ceiling under Section 80C
Withdrawals are fully taxable in the year of receipt if deduction was claimed earlier
TDS at 10% is deducted on NSS withdrawals under Section 194EE
This deduction is only available under the Old Tax Regime
Maintain all supporting documents for at least 6 years for tax compliance
Consult a tax advisor for proper tax planning and compliance

Conclusion

Section 80CCA of the Income Tax Act provides tax deduction for specific NSS deposits and LIC annuity plans, but its relevance has significantly diminished over time due to the 1 April 1992 cutoff date. While most taxpayers today won't benefit from this section, it remains important for those holding legacy deposits. Understanding the eligibility criteria, deduction limits, and withdrawal taxation rules is essential for proper tax planning and compliance. For modern tax-saving investments, taxpayers should focus on the broader Section 80C provisions, which offer multiple investment options and wider applicability.

Always consult with a qualified Chartered Accountant or tax Lawyer to ensure correct tax treatment of your investments and optimize your tax savings while remaining fully compliant with Income Tax regulations.