Pension - [Section 10(10A)] - Income Tax - Ready Reckoner - Income Tax

PENSION [ Sec. 10(10A) ] Pension can be divided into two types: Uncommuted Pension Commuted Pension Uncommuted Pension - It is fully 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 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 . INCOME TAX ON COMMUTED PENSION: Computation of income tax on commuted pension at the time of filing income tax return will be as follows: Amount received as commuted pension xxx less: Amount exempt xxx COMPUTATION OF PENSION AMOUNT EXEMPT: Received from Government Employer: Fully exempt from Income Tax. Pension received from Non-Government Employer: The following shall be exempt: If Gratuity is received along with pension: 1/3rd of the amount of pension which he would have received had he commuted 100% of pension. If no Gratuity and only Pension received: 1/2 of the amount of pension which he would have received had he commuted 100% of pension. National Pension System, in case of an employee Central Government/ State Government on or after January 1, 2004 or any other employer NPS is applicable to new entrants to governments services or any other employer. As per the scheme, it is mandatory for person entering government services on or after January 1, 2004 to contribute 10% of salary every months NPS. A matching contribution is required to be made by the employer to said account. the tax treatment under this scheme is as follows - Contribution by the employer to NPS is first under head of salaries in hand of the employee. Such contribution is deductible [ to the extent of 10% of the salary (14% of salary, if contribution is made by the central government/State government) of the employee ] under section 80CCD(2). Employee's contribution to NPs (to the extent of 10% of salary of the employee) is also deductible under section 80 CCD(1). when pension is received out of the aforesaid amount it will be chargeable to tax in the hands of the recipient. Other Point Commutation of pension received by Judges of the Supreme Court and High Courts will be entitled to the exemption of the commuted portion under section 10(10A)(i) of the Act. [ circular no. 623 , dated 06/01/1992 ] An employee, holding civil post under state government is eligible for exemption u/s 10(10A)(i) of Income tax act. [ ITO (TDS) , KOTTAYAM. V. Mahatma Gandhi University, 2019 (5) TMI 1373 - ITAT COCHIN ]