Arunachalam, email@example.com, Chennai: I am having ICICI pension fund which is going to mature Feb 2020. But ICCI manager telling to close premature to reduce income tax and reinvest another policy? this is correct? This is advantage for me? please advise. Present my Annual income less than 2 lakhs. The policy matures around 11lakh.
Under section 10(10A) of the Income tax Act, if the amount is withdrawn on maturity, one-third of the total amount shall be exempt from tax and the rest of the money shall be distributed as annuity which is taxable as and when annuity is received. However, if the amount is withdrawn prematurely, no exemption shall be available and the entire amount shall be taxable. The reinvestment, however, shall be eligible for deduction under section 80CCC subject to the limit of INR 1.5 lakh (including other deduction u/s 80C of the Act). You have not mentioned the amount which you will receive on premature withdrawal. However that your other income is Rs. 2 lakhs it seems you would be better off by continuing with the existing pension fund so that in 2020, you can commute 1/3rd of total pension which will be tax free and thereafter receive annuity.
The query is responded by Ashok Shah, Partner, N.A Shah Associates LLP