Jayanta Bandyopadhyay 26 January 2022

Buying annuity policy from lic by own managed superannuation fund

Employer had set up own managed Superannyation Fund , duly recognized by IT Act and its income is tax exempt.

On superannuation, contribution defined fund lying to credit of retiring employee, is utilized to buy annuity Policy from LIC to pay annuity. Master Policy is in the name Trust Fund with sub account in employee name. But 2% GST is charged and pension value gets reduced.

My query.....is it correct to put purchase price sub to GST? As 15% contribution out of salary is within 27% overall limit and Fund's income is not sub to tax.

Please guide.

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Quick Summary

An employee's self-managed superannuation fund, which is tax-exempt, is used to purchase an annuity policy from LIC upon retirement. A 2% GST is being applied to the purchase price, reducing the pension value. The query is whether this GST charge is correct, given the fund's tax-exempt status and the overall contribution limits. Expert advice is sought on this matter.

2 Replies

Dr. MPS RAMANI Ph.D.[Tech.] (Scientist/Engineer) 30 January 2022

Only court can decide this. Tax exemptions under the IT Act are poiicy decisions of the Government(Parliament) which has socereign rights.

Jayanta Bandyopadhyay 30 January 2022

Requesting all experts to guide me on this issue ASAP.

In case you want clarity , kindly guide.

Taxation is sovereign right of Govt but here Trust Fund is exempt from paying any tax. Then as to why at the time of buying annuity from this fund for annuity to retired employee..Will be taxable

thanks