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CA Vishnu Ram
Enlightened
Asked: In:

  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    No, a divorced wife can not claim for family pension as she loses the status of a legally wedded wife. However, the legitimate child/children from a divorced wife shall be entitled to the share of family pension which the mother would have received at the time of death of her husband had she not beeRead more

    No, a divorced wife can not claim for family pension as she loses the status of a legally wedded wife. However, the legitimate child/children from a divorced wife shall be entitled to the share of family pension which the mother would have received at the time of death of her husband had she not been divorced.

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CA Sanjiv Kumar
Enlightened
Asked: In:

  1. CA Manish Kumar Gupta Enlightened

    Hi, The taxability of Pension depends on two factors. First Type of Pension and second type of Employee. The pension is taxable under the head of “Salary” in the hands of the receiver and in the year of receipt and tax is calculated in the following manner: Uncommuted pension i.e. periodical pensionRead more

    Hi,

    The taxability of Pension depends on two factors. First Type of Pension and second type of Employee. The pension is taxable under the head of “Salary” in the hands of the receiver and in the year of receipt and tax is calculated in the following manner:

    Uncommuted pension i.e. periodical pension It is fully taxable in the hands of all employees, whether government or non-government.
    Commuted Pension a) Government employee or employee of local authorities or statutory corporation: Fully Exempted [section 10(10a)(i)] 

    b) Non-Government Employee

    Any commuted pension received is partially exempt from tax in the following manner:

    If the employee is in receipt of gratuity

    Exemption = 1/3 X (100% of Commuted Pension*) *if the employee has commuted the whole of the pension.

    If the employee does not receive a gratuity

    Exemption = 1/2 X (100% of Commuted Pension*) *if the employee has commuted the whole of the pension.

    Caution: Exemption shall be allowed to the extent it is allowed to be commuted and the balance uncommuted Pension received periodically will be fully taxable.

    For example:- Mr. A is drawing a salary of Rs. 20,000 p.m. at the time of retirement and retires from service and becomes entitled to receive a pension of Rs 10,000 p.m. He gets half his pension commuted and receives Rs. 1,50,000/- as lump sum payment. Henceforth, he shall be entitled to a pension of Rs. 5,000 p.m. (If Ram commute his full pension then he will receive Rs 3,00,000)

    Taxability:- 

    1. Uncommuted Pension of Rs 5000 P.M is fully taxable.
    2. Commuted Pension of Rs 1,50,000/-

    If A is a Government Employee: Rs 1,50,000 is fully exempted.

    If A is a non-Government Employee and also receiving Gratuity:

    Exempted pension will be =  Rs 1,00,000 (1/3 X 3,00,000) and the taxable amount will be Rs 50,000/-

    If A is a non-Government Employee and not receiving Gratuity:

    Then Exempted pension will be =  Rs 150,000 (1/2 X 3,00,000) and the taxable amount will be Rs Nil.

     

     

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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Manish Kumar Gupta Enlightened

    Hi, Under Defined-benefit Plan a defined sum of the amount is paid after the retirement of the employee when the employee becomes a pension member.  For this Employer and Employee choose to contributes to a pension fund for paying pension to its employees. It's called funded pension plan. It can alsRead more

    Hi,

    Under Defined-benefit Plan a defined sum of the amount is paid after the retirement of the employee when the employee becomes a pension member.  For this Employer and Employee choose to contributes to a pension fund for paying pension to its employees. It’s called funded pension plan. It can also be unfunded means the benefits are paid for by the employer by himself at the time of retirement.

    Under Defined-contribution Plan, An annuity is paid to the member of an investment scheme. The contribution is made by employee from his salary or by the employer into a pension fund. This pension fund works as an investment fund. At the time of retirement, the pension will be paid out from this fund’s return. Unlike to defined benefit plan, the annuity is not fixed and guaranteed. It may vary as per the performance of the pension plan.   

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Ramesh Sharma
Enlightened
Asked: In:

  1. Kirti Agarwal Beginner

    a) Uncommuted pension:- Under uncommuted pension, employees choose to receive a fixed amount of pension on monthly basis. and in Commuted pension, the employee received a lump sum amount as an advance of his total pension. This means he surrenders a portion of his pension say 50% and receives an advRead more

    a) Uncommuted pension:-

    Under uncommuted pension, employees choose to receive a fixed amount of pension on monthly basis. and in Commuted pension, the employee received a lump sum amount as an advance of his total pension. This means he surrenders a portion of his pension say 50% and receives an advance lumpsum amount this is called commuted pension. The pension may be fully or partly commuted.

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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Vishnu Ram Enlightened

    Resignation is also treated as retirement and section 10(10AA) provides certain exemptions from the amount of leave encashment. This section applies equally to a case of voluntary retirement on account of resignation. In the following manner it will be exempted: Resignation by Government Employee: TRead more

    Resignation is also treated as retirement and section 10(10AA) provides certain exemptions from the amount of leave encashment. This section applies equally to a case of voluntary retirement on account of resignation.

    In the following manner it will be exempted:

    Resignation by Government Employee:

    The full amount of leave encashment is exempted.

    Resignation by other employees:

    The least of below amount is exempted from income tax:

    1. Leave encashment actually received
    2. 10 months “average salary”
    3. Cash equivalent of unveiled leave (Maximum 30 days leave X Completed Year of service).
    4. Maximum Amount as specified by the Govt i.e. Rs. 3,00,000

    Here

    1. Salary” means “Basic + Dearness Allowance” including commission received if any based on a fixed percentage of turnover.
    2. “Average Salary” means the average salary drawn by the employee during the period of 10 months immediately preceding his retirement.

    One important thing is to be required to keep in mind that in the above case Maximum limit of Rs 300000 is cumulative means if the employee has availed the exemption of leave encashment received from any one or more employers, then the limit of Rs. 3,00,000 specified above shall be reduced by the amount of exemption availed earlier.

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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Manish Kumar Gupta Enlightened

    Hi, Encashment of leave at the time of retirement is dealt with in Section 10(10AA) of the Income Tax Act. The exemption is available to the Government and other employees in below manner: A. Govt Employees(Central Govt and State Govt) : The amount of leave encashment received by govt employees on rRead more

    Hi,

    Encashment of leave at the time of retirement is dealt with in Section 10(10AA) of the Income Tax Act. The exemption is available to the Government and other employees in below manner:

    A. Govt Employees(Central Govt and State Govt) :

    The amount of leave encashment received by govt employees on retirement is fully exempt from tax. Means no tax liability on encashment of earned leave at the time of retirement.

    B. Other Employees:

    Least of the below is exempted other employees from the amount received towards Leave encashment at the time of retirement (whether on superannuation or otherwise):

    1. Leave encashment actually received
    2. 10 months “average salary”
    3. Cash equivalent of unveiled leave (Maximum 30 days leave X Completed Year of service).
    4. Maximum Amount as specified by the Govt i.e. Rs. 3,00,000

     

    Here we need to remember the following terms:

    1. “Salary” for the above purpose means “Basic + Dearness Allowance” including commission received if any based on a fixed percentage of turnover.
    2. “Average Salary” means the average salary drawn by the employee during the period of 10 months immediately preceding his retirement.
    3. Relief Sec 89: Employees in service can claim relief under section 89 of the Income Tax Act.

    Regards

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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    The amount of leave encashment received during the tenure of service with the same employer is fully taxable and no exemption is allowed. It will be treated as party of salary and taxable under the head Income from salary.

    The amount of leave encashment received during the tenure of service with the same employer is fully taxable and no exemption is allowed. It will be treated as party of salary and taxable under the head Income from salary.

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Ramesh Sharma
Enlightened
Asked: In:

  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    Companies allow their employees different types of leaves like Casual Levees, Earned Leaves, Medical Leave, Gazetted Holidays, etc. Generally, the employee is allowed to either avail of these leaves or carryforward to next year. Sometimes, the employee is also allowed to encash these unutilized leavRead more

    Companies allow their employees different types of leaves like Casual Levees, Earned Leaves, Medical Leave, Gazetted Holidays, etc. Generally, the employee is allowed to either avail of these leaves or carryforward to next year. Sometimes, the employee is also allowed to encash these unutilized leaves and can earn a salary against them.

    If the employee is given some monetary benefit against his carry forwarded leave then it is called encashment of the leave.

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CA Vishnu Ram
Enlightened
Asked: In:

  1. CA Sanjiv Kumar Enlightened Chartered Accountant

    Taxability of Gratuity Gratuity is taxable under the income head “Salary” in the year of receipt. However, an exemption has been provided under section 10(10) of the income tax act. Following is the way of calculation of Exempted amount: Employee Covered under Payment of Gratuity Act:  Amount of GraRead more

    Taxability of Gratuity

    Gratuity is taxable under the income head “Salary” in the year of receipt. However, an exemption has been provided under section 10(10) of the income tax act. Following is the way of calculation of Exempted amount:

    1. Employee Covered under Payment of Gratuity Act:
    •  Amount of Gratuity Actual Received
    • Rs 20 Lakh
    • (Number of year of service (rounded off) X Monthly Salary (Last drawn Basic salary plus DA) X15)/26
    1. Employee not Covered under Payment of Gratuity Act:
    • Amount of Gratuity Actual Received
    • Rs 20 Lakh
    • [Number of year of service (excluding fraction of years) X Last 10 month’s average salary (basic + DA)/2
    1. Gratuity received by a Government Employee:
    • Gratuity received by a Government employee at the time of death or retirement is fully exempt from tax. Here, Government employee includes Center/State Government employees, Employees of local Authorities and universities set up under an act of parliament or state legislature including its affiliated College but not include the employees of a statutory corporation.
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CA Sanjiv Kumar
Enlightened
Asked: In:

  1. CA Manish Kumar Gupta Enlightened

    Hi, So you have received money, generally, people pay to leave a job. So let see the Income-tax treatment of money received in lieu of notice of resignation. This amount will be treated as "Salary" as defined in section 17(1) and will be chargeable to tax on a receipt basis as mentioned in section 1Read more

    Hi,

    So you have received money, generally, people pay to leave a job. So let see the Income-tax treatment of money received in lieu of notice of resignation.

    This amount will be treated as “Salary” as defined in section 17(1) and will be chargeable to tax on a receipt basis as mentioned in section 15 of the Income Tax Act.

    Thanks

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