Annuity :

1. As per the definition, ‘annuity‘ is treated as salary. Annuity is a sum payable in respect of a particular year. It is a yearly grant. If a person invests some money entitling him to series of equal annual sums, such annual sums are annuities in the hands of the investor.

2. Annuity received by a present employer is to be taxed as salary. It does not matter whether it is paid in pursuance of a contractual obligation or voluntarily.

3. Annuity received from a past employer is taxable as profit in lieu of salary.

4. Annuity received from person other than an employer is taxable as “income from other
sources”.