The Finance Act, 2023 introduced Section 80CCH into the Income Tax Act, 1961, providing specific tax deductions and exemptions for individuals enrolled in the Agnipath Scheme. This provision offers fiscal benefits to Agniveers by incentivizing savings through the Agniveer Corpus Fund.
Agniveer Corpus Fund
The Agniveer Corpus Fund is a dedicated fund created to provide financial benefits to Agniveers after completion of service. Contributions to the fund include:
- 30% of the Agniveer’s monthly salary
- Matching 30% contribution by the Central Government
- Accrued interest on the total contributions
The entire maturity amount, known as the SevaNidhi, is disbursed to the Agniveer after the four-year service period and is fully tax-exempt.
Relevant provision related to Annexure II of Form 24Q
1. Section 80CCH(1): Deduction for Agniveer’s Contribution
- Applicable to individuals enrolled in the Agnipath Scheme on or after 1st November 2022.
- Allows full deduction of the Agniveer’s contribution to the Agniveer Corpus Fund from the gross total income.
2. Section 80CCH(2): Exemption for Government Contribution
- The Central Government’s contribution to the Agniveer Corpus Fund is exempt from income tax.
- This amount is not included in the Agniveer’s taxable income.
3. Section 10(12C): Exemption of SevaNidhi Payout
To ensure tax neutrality, the lump-sum SevaNidhi payout—comprising both the individual and government contributions along with accrued interest—is made fully exempt from income tax under Section 10(12C) of the Income Tax Act.
4. Section 17(1)
Section 17(1) was amended to include the Central Government’s contribution to the Agniveer Corpus Fund as part of "salary" for taxation purposes. However, this contribution remains fully exempt under Section 80CCH(2).
5. Section 115BAC
Section 80CCH deductions are available under both the old and new tax regimes. Even under the new concessional tax regime specified in Section 115BAC, Agniveers can avail the deduction under Section 80CCH.
Eligibility Criteria
| Parameter | Details |
| Scheme | Agnipath Scheme |
| Enrolment Date | On or after 1st November 2022 |
| Applicable to | Individual taxpayers only |
| Deduction Available From | Assessment Year 2024–25 onwards |
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EXCELLENT EXPLANATION ABOUT THE PROVISIONS OF SEC 80CCH.BUT ONE CLARIFICATION NEEDED,THE MATCHING CONTRIBUTION BY THE CENTRAL GOVERNMENT IS INCLUDIBLE IN THE GROSS SALARY AND THEN EXEMPTION CAN BE CLAIMED VIA DEDUCTION UNDER SECTION 80CCH.KINDLY CLARIFY.
The Govt. contribution under the Agniveer Scheme will be included in section 17(1) which is part of the Gross Salary (in annexure II of Form 24Q). Exemption in full can be claimed u/s 80CCH(2). This deduction applies to both the old and new regime.