Annuities are an attractive option for retirees seeking a reliable source of income. However, before making any decisions, it is important to understand what annuities are and how they work.
Annuity plans, also known as annuities, are periodic payments or payouts made to policyholders from the accumulated corpus. These are a kind of regular income to provide financial assistance during old age.
With money accumulated from policyholders either in installments or lump sums, annuities allow you to plan for retirement needs in advance.
Whether your other assets are depleted, or you don't have a ready source of income to survive post-retirement years, annuity plans come to the rescue. Withdrawals from such plans can only be made only after certain periods.
So, it is an agreement between investors and insurance companies wherein investors pay premiums in exchange for regular payments after the policy ends.
The working of annuity plans is simple. Let's understand how they work in brief.
Based on several factors, annuities are categorized into different types. Let's have a look at them and their structure.
Contributions made during the accumulation stage of a delayed annuity plan are eligible for tax deductions under Section 80CCC, up to a maximum of Rs 1.5 lakh per fiscal year. Section 10(10A) allows for the tax-free withdrawal of up to one-third of the corpus at the moment of vesting.
The remaining amount is paid out as an annuity as the annuity is a form of income, which is treated as income and taxed accordingly.
This blog is purely for educational purposes and not to be treated as personal advice. Mutual funds are subject to market risks, read all scheme-related documents carefully.