Annuity Is Not Taxed As Interest Income, Cannot Be Claimed As Deduction Under Section 80TTB

One can claim standard deduction on annuity if the annuity is purchased out of superannuation fund. Profit on sale of land will be taxed as capital gains. Income from term deposit in India is taxable both in India and the US

Balwant Jain

Updated on: 18 May 2024 10:12 am

Section 80TTB, Tax, Interest Income, deductions

I have an annuity policy and I have paid an annual premium of Rs. 10,000 for 10 years on it. Upon maturity, I have chosen the option of taking annual annuity from the corpus. Is the annuity income taxable? If yes, will it be considered as interest income? If it is treated as interest income, can I claim deduction under Section 80-TTB of the Income-tax Act, 1961. Can I also claim standard deduction on it?

You have purchased an annuity from an insurance company, and annuity is not treated as interest income, but taxed as annuity under the head “Income from other sources”. Since it is treated as annuity, you cannot claim deduction on it under Section 80TTB.

Also note that standard deduction is available against income taxable under the head “salaries”. However, one claim standard deduction on annuity if the annuity is connected with services rendered as an employee in the past. So, standard deduction will be available in respect of annuity received from provident fund or for annuity purchased out of superannuation fund.

I had executed an agreement in April 2023 to sell a plot of land for Rs 80 lakh. The buyer started paying me the consideration money in instalments. Till March 31, 2024 he has paid me about Rs 50 lakh in total. How do I show this amount in my income tax return (ITR)?

A land is a capital asset and any profits on sale of such assets will be taxed as capital gains.

However, an agreement to sell does not result in the transfer of any asset. It is only considered a sale when a final sale deed is executed and a transfer of the asset takes place. Since there is no transfer and no capital gains, you do not have to show any income under the head “capital gains”. There is no requirement to show any advance received in your ITR, unless your taxable income exceeds Rs 50 lakh in a year.

After her marriage in 2015, my daughter went to the US and settled there. She has a term deposit in India which gets renewed every year. She also has a Permanent Account Number (PAN), but she has not filed a single ITR after she went to the US. She has taken up a job recently and is paying tax on it in the US. The bank has been deducting tax on the interest accrued on term deposit. Over the years since she left for the US, the tax deducted (TDS) has become quite substantial. How can she save on TDS here and claim refund on the amount deducted? The interest on term deposit is the only income for her in India and it does not cross the basic tax exemption limit.

The interest income from her deposits in India is taxable in her hand in the US as well as in India. So, she should have disclosed it in the US, too.

Under the existing tax laws, a person can file his/her income tax return for one year only at a time, so the question of her getting a refund in respect of tax deducted in the past by filing an ITR does not arise. She can start filing her return from the current year onwards and claim the refund for tax deducted at source during the past year.

In respect of past tax deducted, she can make an application under Section 119 of the Income-tax Act, 1961 in accordance with the circular of 2015 for condonation of delay, and file her returns for past six years and claim the refund along with the reference number of the order.

The author is a tax and investment expert

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