Jun 145 min read

Section 80CCH of the Income Tax Act: Understanding the Agnipath Scheme

Updated: Jul 1

Expenses that can be deducted from a taxpayer's gross income in order to lower the amount of income liable to taxes are commonly referred to as deductions. The Income Tax Act Offers Multiple Deductions For Assessee Benefits. These deductions can only be made by qualified taxpayers on their income tax filings. Only those deductions that are permitted by law may be taken to save taxes for these qualifying taxpayers, as stipulated under various parts of the Act. It is necessary to claim the income tax deduction at the time the income tax return is filed. In addition to lowering tax obligations, claiming an income tax deduction at the time of filing helps people save money and make investments. In this article, we will explain the deductions available under Section 80CCH as per the Agnipath Scheme.

Table of content

Understanding the Agnipath Scheme

Agniveer Corpus Fund

Features of Section 80CCH of the Income Tax Act

Tax Exemptions under Section 80CCH

Eligible Deductions on the Agniveer Corpus

Conclusion

Most Asked Questions

Understanding the Agnipath Scheme

The Agnipath project was unveiled by the Indian government on June 14, 2020. Its objective was to admit young, gifted people to the military. Applications were accepted from people aged 17.5 to 21 years old. The plan uses a tour-of-duty methodology in which participants are assigned as soldiers to three different armed forces branches. 25% of these "Agniveers" are eligible to become regular military cadres after serving for four years. The yearly pay for soldiers enrolled in this programme will be around Rs. 4.76 lakh. This income will increase to around Rs. 6.92 lakh in the last year. In addition, the candidates receive ration, risk and hardship, travel, and other allowances as needed. Compensation for incapacity and death is also covered by this plan.

Agniveer Corpus Fund

SevaNidhi is available to those who are enrolled in the Agnipath programme. It is a set sum of money awarded at the end of the employee's four-year employment term. Participants must contribute 30% of their monthly income to the Agniveer corpus fund to be eligible. The Central Government matches the amount each member contributes, adding to the total amount of money in their accounts. The Agniveer corpus fund is made up of contributions from the Central Government and a person as well as income earned on each of these contributions. Over four years, interest will be accrued on the entire principal, resulting in a maturity amount of roughly ₹10.04 lakhs + applicable interest.

Features of Section 80CCH of the Income Tax Act

People registered in the Agnipath Scheme on or after November 1, 2022, who are between the ages of 17.5 and 21.
The aim of the Agnipath Scheme is to offer tax benefits to people who are enrolled in it as a means of recruiting for the Indian Armed Forces.
Under the tour-of-duty style of the scheme, individuals are commissioned as soldiers into each of the three armed forces components.
Upon completion of a 4-year employment term, 25% of "Agniveers" may choose to become regular members of the armed services.
Additional ration, risk and hardship, travel, and other allowances are given as needed. Compensation for incapacity and death is also included in the plan.
After working for four years, Agniveers who contribute thirty percent of their monthly income to the Agniveer corpus fund are eligible to receive SevaNidhi. This contribution is attributed to the government.
You are eligible to deduct the whole amount that you and the Central Government have contributed to the Agniveer Corpus Fund. The previous and new tax regimes both allow for this deduction.
At the conclusion of the four-year service period, the sum received from the Agniveer Corpus Fund is completely free from income tax.

Tax Exemptions under Section 80CCH

The following advantages of Section 80CCH are provided by both the old and new tax regimes:

Deductions under Section 80CCH- Under Section 80CCH, the Central Government and individuals can deduct their donations to the Agniveer corpus fund from their taxes. The advantages are available to everyone who signed up for the programme on or after November 1, 2022.
A New Clause in Section 10- Additionally, the authorities have suggested adding a clause (12C) to Section 10. It concerns the exemptions that apply to the money that candidates or their nominees receive under the Agnipath programme.
A Subclause As per Section 17(1)- Additionally, a suggestion is made to amend Section 17 (1) by adding a subclause. Under this section, candidates may reveal their pay from the prior fiscal year's contributions made by the Central Government. Additionally, it will enable applicants to make use of Section 80CCH tax benefits.
Taxes Not Included in Section 115BAC- Additionally, under Section 115BAC, the administration has suggested tax breaks for contributions made by the Central administration. Those who adhere to the new tax system will also profit from it.

These changes take effect on April 1, 2023, and they remain applicable for the ensuing assessment years. New Income Tax Return (ITR) forms for the assessment year 2025–2026 and the financial year 2024–2025 were shared by the income tax department in 2024. It added a new column to ITR 1 and four forms, requiring the individual to declare the amount allowed as a deduction under Income Tax Act section 80CCH.

Eligible Deductions on the Agniveer Corpus

It is possible for individuals to deduct their whole contribution to the Agniveer corpus fund. Only the previous regime is applicable to this deduction. Additionally, individuals may be able to claim the whole amount of the Central Government's contribution to the aforementioned assessee's Agniveer Corpus Fund account. The assessee is eligible for this deduction under both the old and current regimes. Important Note: If an individual chooses to pay taxes under the new tax regime, they will not be able to claim a deduction for the contributions they made under the plan.

Conclusion

Contributions to the Agniveer Corpus Fund made by applicants as well as the Central Government are eligible for significant tax deductions under Section 80CCH of the Income Tax Act. In Sections 10 and 17, this provision adds new sections that exempt scheme-related income from taxes and permit Central Government contributions to be deducted from the applicant's wage. In addition, the amendment covers Section 115BAC, guaranteeing individual tax advantages under the new tax structure.

FAQ

Q1. What is Section 80CCH of income tax?

In the 2023 Union Budget, a new section known as Section 80CCH of the Income Tax Act was created with the intention of encouraging participation in the Agnipath Scheme. It allows for tax deductions on the total amount that the Central Government and the individual have contributed to the Agniveer Corpus Fund.

Q2. What is Section 80CCH(2) of income tax?

According to section 80CCH(2) of the Income Tax Act, the aggregate amount that applicants and the federal government give to the Agniveer Corpus Fund is deductible.

Q3. What is the Agnipath Scheme?

The Ministry of Defence of the Government of India offers the Agnipath Scheme as a means of enrollment in the Indian Armed Forces.

Q4. Who is eligible for the Agnipath Scheme?

Male and female candidates between the ages of 171/2 and 21 who have passed their 10th grade test from a board of schooling approved by the Indian government's Ministry of Education are eligible to apply for Agniveer (MR).

Q5. What is the Agniveer Corpus Fund scheme?

The Agniveer corpus fund is made up of contributions from the Central Government and a person as well as income earned on each of these contributions. Over the course of four years, interest will be accrued on the entire principal, resulting in a maturity amount of roughly ₹10.04 lakhs + applicable interest.

Q6. Are the Section 80CCH deductions available under the New Tax Regime?

Under the new tax scheme, the only deductible that is permitted is the Central Government's contribution. Under the new tax structure, the assessee's own contributions are not eligible for a deduction.