If you have been a regular visitor to this blog you must be knowing about Life Insurance Plans (LIP). While Life Insurance Plans take care of you and your family in case of permanent disability or worse-death. Pension Plans are their to take care of you if u survive. :)
In LIP you get entire sum assured or maturity value at one go, which is tax free, but in case of Pension Plans, you get only 1/3 rd of the maturity benefit (tax free). Rest is given as annuity (or pension) and is taxed as any other income is taxed. If you choose to withdraw the remaining 2/3 rd amount in one go, then you will have to pay tax on that.
While premium paid for LIP comes under Sec 80 C, for pension plans it comes under Sec 80 CCC.
One thing to keep note of is that Pension Plans come with 'With Cover' and 'Without Cover' option. Under 'With Cover' option, in case of death of the policy holder, the sum assured is paid to the nominee (like in LIP). While in 'Without Cover' Plan, only the accumulated amount (plus bonus if any) is given to the nominee.
In LIP you get entire sum assured or maturity value at one go, which is tax free, but in case of Pension Plans, you get only 1/3 rd of the maturity benefit (tax free). Rest is given as annuity (or pension) and is taxed as any other income is taxed. If you choose to withdraw the remaining 2/3 rd amount in one go, then you will have to pay tax on that.
While premium paid for LIP comes under Sec 80 C, for pension plans it comes under Sec 80 CCC.
One thing to keep note of is that Pension Plans come with 'With Cover' and 'Without Cover' option. Under 'With Cover' option, in case of death of the policy holder, the sum assured is paid to the nominee (like in LIP). While in 'Without Cover' Plan, only the accumulated amount (plus bonus if any) is given to the nominee.
