Circular No. 500-Income Tax dated 9-12-1987

1333. Life Insurance Corporation’s new annuity plan with return of corpus with group pension terminal bonus – Approval by Commissioner to deed of variation executed by approved superannu­ation funds incorporating new annuity plan – Part B of Fourth Schedule read with rule 89 of Income-tax Rules

1. As per rule 89 of Income-tax Rules, 1962, the trustees of an approved superannuation fund may either enter into a scheme of insurance with Life Insurance Corporation of India (LIC) or accumulate the contributions in respect of each beneficiary and purchase on annuity from the LIC at the time of retirement or death of each employee or on his becoming incapacitated prior to retirement.

2. Under the existing provisions, the LIC have been offering the option of purchasing any of the following three annuities:

(a)   annuity payable for life only ;

(b)   annuity payable for life with guaranteed payment for 5, 10, 15 or 20 years;

(c)   annuity payable jointly with the beneficiary till one of them is alive.

3. The LIC has recently come out with a new life annuity plan with benefits available under whole life assurance plan with group pension terminal bonus, which provides that on death of the member, the sum assured equal to the corpus is returned with the group pension terminal bonus to the beneficiary. Existing annui­tants may also avail of the benefit of this plan which has been introduced by the LIC in order to give higher returns to benefi­ciaries of approved superannuation funds and to meet the criti­cism that annuity payment represented only periodical payment marginally higher than the interest on capital and on death the capital was lost.

The Board are of the view that in cases where approved superannu­ation funds execute deeds of variation incorporating the provi­sions of new annuity plan, the Commissioners of Income-tax may accord approval to the said deed of variation after satisfying themselves that the conditions laid down in Part ‘B’ of the Fourth Schedule and the relevant Income-tax Rules are satisfied.

Circular : No. 500 [F.No. 216/10/87-IT(A-II), dated 9-12-1987.