Please explain the taxability of pension plans—with life cover and without life cover. If I have not claimed any deduction from my total income under Section 80CCC at the time of depositing the premium amount, will either of my pension or withdrawal be considered as tax-free?
The ‘with cover’ pension plans offer an assured life cover in case of an eventuality, even if the corpus built till the date of death happens to be below that amount. Under the ‘without cover’ pension plan, the corpus built till the date of death (net of deductions like expenses and premiums unpaid) is given out to the nominees in case of an eventuality, with no sum assured. The taxability of a pension plan is determined in two stages. The first is at the time of making annual premium payments. For life insurance plans, the premium which is paid is eligible for deduction under Section 80C. On the other hand, Premium payments towards pension plans are eligible for deduction under Section 80CCC. The overall limit for deduction under Sections 80C and CCC is Rs 1 lakh. In other words, one is eligible for same tax deduction for the premium amount paid for; with or without life cover pension plans.
At the time of maturity, the commuted value of the pension which is received from a life insurance plan is tax-free. However, the monthly pension amounts are fully taxable, irrespective of whether or not the plan holder claimed the deduction under Section 80C or CCC at the time of payment of premium.
At the time of maturity, the commuted value of the pension which is received from a life insurance plan is tax-free. However, the monthly pension amounts are fully taxable, irrespective of whether or not the plan holder claimed the deduction under Section 80C or CCC at the time of payment of premium.
