TYPES OF PENSION:
1) PENSION AFTER RETIREMENT FROM JOB
2) FAMILY PENSION
PENSION AFTER RETIREMENT FROM JOB:
Pension is taxable under the head salaries in your Income Tax Return.
• Usually pension is paid out periodically, on a monthly basis,
• you may also choose to take pension as a lump sum (also called commuted pension) instead of a periodical payment.
• Uncommuted pension or any periodical payment of pension is fully taxable as salary.
• Commuted pension or lump sum received may be exempt in certain cases.
• For a government employee, commuted pension is fully exempt.
• For a non-government employee, it is partially exempt.
• CASE1: If Gratuity is also received with pension – 1/3rd of the amount of pension that would have been received if 100% of the pension was commuted is exempt from commuted pension and remaining is taxed as salary.
• CASE2: only pension is received, gratuity is not received – ½ of the amount of pension that would have been received if 100% of the pension was commuted is exempt
PENSION AFTER RETIREMENT FROM JOB:
Pension is taxable under the head salaries in your Income Tax Return.
• Usually pension is paid out periodically, on a monthly basis,
• you may also choose to take pension as a lump sum (also called commuted pension) instead of a periodical payment.
• Uncommuted pension or any periodical payment of pension is fully taxable as salary.
• Commuted pension or lump sum received may be exempt in certain cases.
• For a government employee, commuted pension is fully exempt.
• For a non-government employee, it is partially exempt.
• CASE1: If Gratuity is also received with pension – 1/3rd of the amount of pension that would have been received if 100% of the pension was commuted is exempt from commuted pension and remaining is taxed as salary.
• CASE2: only pension is received, gratuity is not received – ½ of the amount of pension that would have been received if 100% of the pension was commuted is exempt
FAMILY PENSION:
Pension received by a family member though is taxed under income from other sources in your Income Tax Return.
• If this pension is commuted or is a lump sum payment it is not taxable.
• Uncommuted pension received by a family member is exempt to a certain extent. Rs 15,000 or 1/3rd of the uncommuted pension received -whichever is less is exempt from tax.
For Example – If a family member receives pension of Rs 100000 the exemption available is least of – Rs15,000 or Rs 33333 (1/3rd of Rs 1,00,000). Thus the taxable family pension will be Rs100000 – Rs15000 = Rs85000
IMPORTANT:
Pension that is received from UNO by its employees or their family is exempt from tax. Pension received by family members of Armed Forces is also exempt.