What is an Annuity with Return of Purchase Price (ROP)?

Under the Return of Purchase Price (ROP) option, the insurance company pays you a guaranteed monthly pension for life. Upon your demise, 100% of the original principal amount you deposited is refunded to your nominated beneficiaries.

Are annuity pension payouts taxable in India?

Yes, monthly or annual annuity payouts received from life insurance companies (including pensions from NPS annuities) are considered taxable income and are taxed at your applicable income tax slab rate in the financial year received.

What is the difference between an immediate annuity and a deferred annuity?

With an immediate annuity, you invest a lumpsum today and pension payments begin within a month. With a deferred annuity, your money remains invested to grow during an accumulation phase, and pension payouts begin at a future date of your choosing (e.g. 5 or 10 years later).

RETIREMENT TOOL

Annuity Deposit Calculator

Calculate your monthly annuity income from a lumpsum deposit

Deposit Details

Lumpsum Amount

₹1,000₹5 Crores

Minimum deposit: ₹1,000

Tenure

Interest Rate (% p.a.)

4%10%

Interest calculated monthly on remaining balance

Monthly Annuity Payment

₹1,957

Total Months

60 months

Total Payout

₹1,17,397

Investment Breakdown

Principal

₹1,00,000

Total Interest

₹17,397

Deposit Amount₹1,00,000

Interest Rate6.5% p.a.

Tenure5 years

Total Interest Earned₹17,397

Total Payout Amount₹1,17,397

How It Works

Deposit a lumpsum amount (minimum ₹1,000)

Choose tenure: 3, 5, 7, or 10 years

Interest is calculated monthly on the remaining balance

Receive fixed monthly annuity payments

Balance reduces to zero at maturity

FINANCIAL GUIDE

What is an Annuity & How Does Guaranteed Pension Work?

An annuity is a contract between an individual and a life insurance company where the investor deposits a lump sum amount in exchange for guaranteed regular income payments for life (or for a specified period).

Annuities are primarily categorized into: 1) Immediate Annuity — payouts begin immediately (e.g. within one month of lumpsum deposit), and 2) Deferred Annuity — payouts commence at a future date after an accumulation phase.

Annuities eliminate market risk and longevity risk (the risk of outliving your wealth), making them a key building block for the guaranteed-income bucket in comprehensive retirement portfolios.

Annuity Options & Key Parameters

Parameter	Details & Guidelines
Immediate Annuity	Payouts start right away (monthly, quarterly, or yearly) after lumpsum deposit.
Life Annuity with Return of Premium (ROP)	Lifelong pension; original purchase price returned to nominees upon death.
Joint Life Annuity	Pension continues to spouse after the primary annuitant's demise.
Typical Annuity Yields	5.5% to 6.8% p.a. depending on age, option chosen, and prevailing interest rates.
Taxation on Pension	Periodic annuity payouts are treated as income and taxed at your marginal slab rate.

Annuity vs Systematic Withdrawal Plan (SWP) vs SCSS

Guaranteed Annuity

Absolute income certainty guaranteed for life by an insurer, eliminating stock market risk completely.

Systematic Withdrawal Plan (SWP)

Higher returns (8%–11%) and superior capital gains tax efficiency, but carries market exposure.

Try SWP Calculator →

National Pension System (NPS)

Accumulate retirement wealth and purchase a mandatory 40% annuity at 60 with exclusive tax deductions.

Try NPS Calculator →