Tax upon Annuity

Annuity is an annual grant received by the employee from his employer and is covered under the definition of salary. It may be paid by the employer voluntarily or on account of contractual agreement. A deferred annuity is not taxable until the right to receive the same arises. Other form for annuities made under a will or granted by a life insurance company or accruing as a result of contract come under the head "Income from Other Sources" and are assessed u/s 56 of the I.T. Act.