A pension plan is a retirement tool. It allows you to claim income tax benefits against your premium payments, by way of both deduction and exemption.

Deductions from gross income (Under Section 80C of the Income Tax Act)

You can deduct from your taxable income to a total of Rs. 1 lakh in certain instances, such as your insurance payments.

The pension you receive is taxable as salary whereas family pension received by your legal heirs is taxable as income from other sources.

If you take a lump sum of the accumulated corpus, a certain proportion of the fund value can be taken home as tax free.

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