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Pension – Section 10(10A)

Uncommuted pension i.e pension received in regular instalments is taxable for all employees.

Commuted means to pay in one time rather to pay in instalments.

Commuted pension is exempt from tax as per the following provisions:

Employees of Central Government, State Government, Local authority, statutory corporation

Commuted pension is fully exempt in hands of such employees.

Any other employee:

For any other employee the amount of exemption will be as follows.

Employee also receives gratuity – 1/3 of Commuted value of pension

Employee not receives gratuity – ½ of Commuted value of pension

Notes:-

If pension is partly commuted and partly uncommuted then each portion’s exemption is calculated accordingly.

Commuted value of pension = Pension received / % of pension commuted

Commuted pension received from pension fund established by LIC or any other approved insurer under section 10(23AAB ) is exempt from tax for all employees.

Pension  is taxable under the head Income from Salary. Family pension received by legal heirs is not income from salaries, it shall be taxed as “income from other sources”

 

9 comments

  1. Padam chand aggarwal

    The amount of rs.190000/-received from paid up of pension policy @10000/- per year for 12 year is taxable. right?
    The agent of icici says if u re-invest rs.70000/-ur money in some other policy u need not pay tax, is it true

  2. Padam chand aggarwal

    i purchased a icici life pension policy @10000/- per year for 12 year .now is to be matured on 5/2/2016 and fund value 190000/.company 1/3 amount a lump sum and balance fund year ly pension of8000/.if full amount with drawn or 2/3 amount withdrawn from that 190000/-.kindly tax position of withdwran amount. thanking you.

  3. Mangala G.Kadam

    Ex Army man now serving with Central Govt. He is getting Pension fromMilitary. Whether the Military Pension is taxable or not. Whether the pension amount is to be added with the Salary amount he is drawing now.

    • Military pension also taxable. Salary amount to be added and military pension as income from other sources

  4. The amount received from paid up of pension policy is taxable. right?
    The agent says if u re-invest ur money in some other policy u need not pay tax, is it true

    • Padam chand aggarwal

      The amount of rs.190000/-received from paid up of pension policy @10000/- per year for 12 year is taxable. right?
      The agent of icici says if u re-invest rs.70000/-ur money in some other policy u need not pay tax, is it true

      • Prateek Agarwal

        This is not true.
        If you make a new investment then such new investment can be deducted from the taxable income if such investment falls under any tax saving investments.
        But its not possible that you invest a small amount (Rs. 70,000) and you get deduction for a large amount(Rs. 1,90,000)

  5. CLARIFICATION NEEDED:
    Pl. help to clarify on the tax applicability if any when pension corpus is moved from one pension scheme to another.
    At present I have corpus that is accumulated in the Company’s Defined Benefits Scheme and I am looking for moving the corpus to any other pension scheme that offers better returns.
    However, before I take this decision, I like to understand if there will be Income Tax applicable due to withdrawal (plan is to withdraw 2/3rd of the corpus) from one scheme and depositing in another..?

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