Income tax rules for annuity received from LIC1 min read . Updated: 18 Oct 2020, 07:11 AM IST
How is annuity received under Pradhman Mantri Vyay Vandna Yojna (PMVVY) taxed?
I superannuated from a PSU company. After my retirement my employer deposited some money with LIC (Life Insurance Corporation) for annuity. Out of that money LIC is paying me ₹9,299 p.m. as annuity. I want to know as to under which head of income, the annuity received from LIC, is to be offered? If it is to be taxed under the head Salaries am I entitled to claim standard deduction of 50,000?
My wife has also deposited some money under Pradhman Mantri Vyay Vandna Yojna (PMVVY) of LIC of India. Please confirm whether she can claim standard deduction of ₹50,000?
By Balwant Jain, Chief Editor, ApnaPaisa
An employee is entitled to claim standard deduction, up to a maximum amount of ₹50,000 in a financial year, against any income which is taxable under the head “Salaries". The standard deduction is available against salary received whether in arrears or in advance or for current period. In addition to salary received in present employment, pension received from the ex-employer also becomes taxable under the head Salaries. So the ex-employees are also entitled to claim standard deduction against the pension income.
For all the pension which accrued to a person by virtue of his employment, whether received from employer or not, the tax payer can claim the standard deduction. So pension received by a retired person from Employee Provident Fund Office (EPFO) as well as an annuity received from LIC or an insurance company, in respect of annuity bought by the employer for superannuation, becomes taxable under the head “Salaries" and thus entitle the recipient to claim standard deduction.
Please note that any periodic payment received as pension, on an annuity purchased by you directly, becomes taxable under the head “Income from other sources" and not “Salaries" therefore not eligible for standard deduction.
For the reasons explained above the annuity received by your from LIC becomes taxable under the head “Salaries" and therefore entitles you for standard deduction.
The annuity earned by your wife under Pradhman Mantri Vyay Vandna Yojna (PMVVY) is taxable under the head “Income from other sources" so your wife is not entitled for this deduction.
(Views as expressed by the expert.)