Annuity (as per income tax India)

 Annuity 

(As per Income Tax Law India)

As per the definition and annuity is treated as a salary.

What is an Annuity?

Annuity is a sum payable in admire of a specific year. It is a every year grant. If someone invests some cash entitling him to collection of same annual sums, such annual sums are annuities in the hands of the investor.

In other words, 

An annuity is a settlement among you and an insurance corporation in that you make a lump-sum fee or series of payments and, in return, acquire ordinary disbursements, starting both at once or sooner or later in the future.

Tax treatments of Annuity 

• In case you received annuity from present employer it is to be taxed as salary.
• Annuity  received from past employer is taxable as part of profit in Lieu of salary.
• Any annuity received from a person who is not an employer is taxable as 'income from other sources'. (FY 22 - 23)

Types of Annuity:

Annuities are of basically three types: Fixed, variable, and indexed.

(i) Fixed Annuity :

Fixed annuities pay out a assured amounts or guaranteed amount.

This type of annuity comes in two different styles—

Fixed immediate annuities, which pay a fixed rate right now, and 

Fixed deferred annuities, which pay you fixed rate later.

(ii) Variable Annuity 

Variable annuities provide the opportunity of better returns and extra profits than fixed annuities, however there’s also a risk that the account will fall in value.

It's based on performance of sub account selected by you.

You can buy an annuity with either a lump sum or a series of payments, and the account’s value will grow accordingly.

(iii) Indexed Annuity 

Indexed Annuity is a type of Annuity which pays you interest on basis of particular market performance.

Like Nifty (India), S&P 50, etc

Indexed annuities give buyers an opportunity to benefit when the financial markets perform well, unlike fixed annuities, which pay a set interest rate regardless.