A Question Of (Right) Choice

Annuity policies come with an array of options

- K Nitya Kalyani

Having decided to buy an annuity policy, you can choose from various options. Before that, let us look at the tax implications.

Up to ₹50,000 per year of your annuity purchase price brings you a tax deduction under Section 80CCC of the Income-Tax Act, 1961. This is over and above the ₹1.5 lakh under Section 80C for life insurance policy premiums, Employee or Public Provident Fund and so on. Any contribution to the National Pension Scheme will also come under this ₹50,000 umbrella.

On the vesting date, you can commute up to a third of the accumulated amount without tax and the balance is applied towards the annuity. The annuity itself, the pension payments you receive after vesting date, are taxable as part of your income. This is important when you plan your post-retirement income flows.

How would you like to receive your annuity is the next decision.