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:-
- Uncommuted Pension of Rs 5000 P.M is fully taxable.
- 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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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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