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Pension - [Sec. 10(10A)] - Salary Income - Income Tax

Pension - [Sec. 10(10A)]
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PENSION [Sec. 10(10A)]

  • Pension can be divided into two types:
  1. Uncommuted Pension
  2. Commuted Pension
  • Uncommuted Pension -It is taxable  as salary under section 15 in the hands of a Government employee as well as a non - Government employee.
  • Commuted Pension is received in one time rather in installments.
  • In case of employees of Central & State Govt. or Local Authority or statutory corporation, the entire commuted value of pension is exempt 10(10A)(i).

Payment in commutation of pension received by any other employee-

  • In case of any other employee, if the employee receives gratuity, the commuted value of  one third (1/3) of the pension is exempt, otherwise, the commuted value of ½ of the pension is exempt.
  •  If payment in commutation of pension received  by the employee exceeds the aforesaid limits. Such excess is liable to tax in the assessment year relevant to the previous in which  it is due  or paid .The assessee can ,however , claim relief  in term of section 89 read with rule 21A

          National  Pension scheme In case  of an employee joining Central  Government  on or after January 1, 2004 or any other employer- These provision are given below-

         1. Contribution by the Central Government or any other employer to the National Pension System (NPS) is first included under the head ''Salaries" in the hands of the employee.

         2.Such contribution is deductible ( to the extent of 10 percent of the salary of the employee) under section 80CCD(2).

         3.Employee 's contribution to NPS (to the extent of 10 percent of the salary of the employee  or ₹ 100,0001,whichever is less) is deductible under section 80CCD(1)2.

         4.When pension is received out of the aforesaid amount , it will be chargeable to tax in the hands of recipient ..

         5.The aggregate amount of deduction under section 80C ,80CCC and 80CCD(1) (i.e, contribution by employee (or any other individual ) towards NPS) can not exceed ₹ 150,000*.

        6. ''Salary " means basic salary  and dearness allowance ( if the term of employment  so provide ) but excludes all other allowance and perquisites .It also includes commission  if commission  is payable at a fixed percentage of turnover achieved by an employee. 

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           * From the assessment year 2012-2013 employer 'contribution towards NPS is not considered  for the purpose of monetary ceiling of ₹ 150,000.

           1.   This ceiling of ₹ 100,000 is not applicable from the assessment year 2016-2017.

           2.  From the assessment year 2016-2017 ,a new sub section (1B)  has been inserted in section 80CCD so as to provide for an additional deduction in respect of any amount paid (up to ₹ 50000) for contribution  made by any individual assessee under the NPS . on this additional contribution,the ceiling of ₹ 1,50,000( as given above) will not applicable .

           3. For more detail of section 80CCD please refer chapter  EXEMPTION AND DEDUCTION.

 
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