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T. Banusekar

I AM 60 years old and plan to invest in LIC Varishtha Bima Yojana. Please advise me as to whether the pension that I receive from the LIC under the scheme will be taxable? What will be the tax implication of the maturity amount received by my nominee after my death?

Parthasarathy

Reply

Pension received from Varishtha Bima Yojana will be taxable as income under the head `Income from other sources' in your hands. The sum received by your nominee after your death will not be taxable, though.

The pension will be taxable since the scheme is not a life insurance policy but an investment which yields a return. It may be the remembered that only sums received under a life insurance policy can be claimed as exempt subject to certain exceptions under Section 10(10D).

In fact, what you receive under this scheme is interest for the investment made by you.

Under the said scheme, on the death of the investor the amount invested will be returned to the nominee. This sum returned would only be the principal amount invested. Since the same is only a return of the original investment, it will not be treated as income within the meaning of Section 2(24) and, hence, not taxable in the nominee's hands.

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