Taxability of Retirement Benefits
1. Introduction – On retirement, an employee normally receives certain retirement benefits. Such benefits are taxable under the head ‘Salaries’ as ‘profits in lieu of Salaries’ as provided in section 17(3). However, in respect of some of them, exemption from taxation is granted u/s 10 of the Income Tax Act, either wholly or partly. These exemptions are described below:-
1. Introduction – On retirement, an employee normally receives certain retirement benefits. Such benefits are taxable under the head ‘Salaries’ as ‘profits in lieu of Salaries’ as provided in section 17(3). However, in respect of some of them, exemption from taxation is granted u/s 10 of the Income Tax Act, either wholly or partly. These exemptions are described below:-
2. GRATUITY (Sec. 10(10)):
(i) Any death cum retirement gratuity received by Central and State Govt. employees, Defence employees and employees in Local authority shall be exempt.
(ii) Any gratuity received by persons covered under the Payment of Gratuity Act, 1972 shall be exempt subject to following limits:-
(a) For every completed year of service or part thereof, gratuity shall be exempt to the extent of fifteen days Salary based on the rate of Salary last drawn by the concerned employee.
(b) The amount of gratuity as calculated above shall not exceed Rs 10 Lakh.
(iii) In case of any other employee, gratuity received shall be exempt subject to the following limits:-
(a) Exemption shall be limited to half month salary (based on last 10 months average) for each completed year of service
(b) Rs. 10 Lakhs whichever is less.
Where the gratuity was received in any one or more earlier previous years also and any exemption was allowed for the same, then the exemption to be allowed during the year gets reduced to the extent of exemption already allowed, the overall limit being Rs. 10 Lakhs.
As per Board’s letter F.No. 194/6/73-IT(A-1) dated 19.6.73, exemption in respect of gratuity is permissible even in cases of termination of employment due to resignation. The taxable portion of gratuity will quality for relief u/s 89(1).
Gratuity payment to a widow or other legal heirs of any employee who dies in active service shall be exempt from income tax(Circular No. 573 dated 2 1.8.90).
3. COMMUTATION OF PENSION (SECTION 10(10A)):
(i) In case of employees of Central & State Govt. Local Authority, Defence Services and Corporation established under Central or State Acts, the entire commuted value of pension is exempt.
(ii) In case of any other employee, if the employee receives gratuity, the commuted value of 1/3 of the pension is exempt, otherwise, the commuted value of Y2 of the pension is exempt.
Judges of S.C. & H.C. shall be entitled to exemption of commuted value upto Y2 of the pension (Circular No. 623 dated 6.1.1992).
4. LEAVE ENCASHMENT (Section 10(10AA)):
(i) Leave Encashment during service is fully taxable in all cases, relief u/s 89(1) if applicable may be claimed for the same.
(ii) Any payment by way of leave encashment received by Central & State Govt. employees at the time of retirement in respect of the period of earned leave at credit is fully exempt.
(iii) In case of other employees, the exemption is to be limited to the least of following: (a) Cash equivalent of unutilized earned leave (earned leave entitlement can not exceed 30 days for every year of actual service) (b) 10 months average salary (c) Leave encashment actually received. This is further subject to a limit of Rs.3,00,000 for retirements after 02.04.1998.
(iv) Leave salary paid to legal heirs of a deceased employee in respect of privilege leave standing to the credit of such employee at the time of death is not taxable.
For the purpose of Section 10(10AA), the term ‘Superannuation or otherwise’ covers resignation (CIT Vs. R.V. Shahney 159 ITR 1 60(Madras).
5. RETRENCHMENT COMPENSATION (Sec. 10(10B)):
Retrenchment compensation received by a workman under the Industrial Disputes Act, 1947 or any other Act or Rules is exempt subject to following limits:-
(i) Compensation calculated @ fifteen days average pay for every completed year of continuous service or part thereof in excess of 6 months.
(ii) The above is further subject to an overall limit of Rs.5,00,000 for retrenchment on or after 1.1.1997 (Notification No. 10969 dated 25.6.99).
6. COMPENSATION ON VOLUNTARY RETIREMENT OR ‘GOLDEN HANDSHAKE’(Sec. 10(10C)):
(i) Payment received by an employee of the following at the time of voluntary retirement, or termination of service is exempt to the extent of Rs. 5 Lakh:
(a) Public Sector Company.
(b) Any other company.
(c) Authority established under State, Central or Provincial Act.
(d) Local Authority.
(e) Co-operative Societies, Universities, IITs and Notified Institutes of Management.
(f) Any State Government or the Central Government.
(ii) The voluntary retirement Scheme under which the payment is being made must be framed in accordance with the guidelines prescribed in Rule 2BA of Income Tax Rules. In case of a company other than a public sector company and a co-operative society, such scheme must be approved by the Chief Commissioner/Director General of Income-tax. However, such approval is not necessary from A.Y. 2001- 2002 onwards.
(iii) Where exemption has been allowed under above section for any assessment year, no exemption shall be allowed in relation to any other assessment year. Further, where any relief u/s 89 for any assessment year in respect of any amount received or receivable or voluntary retirement or termination of service has been allowed, no exemption under this clause shall be allowed for any assessment year.
7. PAYMENT FROM PROVIDENT FUND (Sec. 10(11), Sec. 10(12)):
Any payment received from a Provident Fund, (i.e. to which the Provident Fund Act, 1925 applies) is exempt. Any payment from any other provident fund notified by the Central Govt. is also exempt. The Public Provident Fund(PPF) established under the PPF Scheme, 1968 has been notified for this purpose. Besides the above, the accumulated balance due and becoming payable to an employee participating in a Recognised Provident Fund is also exempt to the extent provided in Rule 8 of Part A of the Fourth Schedule of the Income Tax Act.
8. PAYMENT FROM APPROVED SUPERANNUATION FUND (Sec.10(13)):
Payment from an Approved Superannuation Fund will be exempt provided the payment is made in the circumstances specified in the section viz. death, retirement and incapacitation.
9. DEPOSIT SCHEME FOR RETIRED GOVT/PUBLIC SECTOR COMPANY EMPLOYEES:
Section 10(15) of the Income Tax Act incorporates a number of investments, the interest from which is totally exempt from taxation. These investments may be considered as one of the options for investing various benefits received on retirement. One among them, notified u/s 10(1 5)(iv)(i), is the DEPOSIT SCHEME FOR RETIRED GOVT/PUBLIC SECTOR COMPANY EMPLOYEES which is a particularly attractive option for retiring employees of Govt. and Public Sector Companies. W.e.f. assessment year 1990-91, the interest on deposits made under this scheme by an employee of Central/State Govt. out of the various retirement benefits received is exempt from Income-tax. This exemption was subsequently extended to employees of Public Sector companies from assessment year 1991-92 vide notification No. 2/19/89-NS-II dated 12.12.1990. Salient features of the scheme are discussed below:
◦Rate of Return – Tax free interest @ 9% P.A. payable half yearly on 30th June and 31st December
◦Limit of Investment – Minimum Rs. 1000. Maximum not exceeding the total retirement benefits.
◦Liquidity – Entire balance can be withdrawn after expiry of 3 years from the date of deposit. Premature encashment can be, made after one year from the date of deposit in which case interest on amount withdrawn will be payable @ 4% from the date of deposit to the date of withdrawal.
◦Other considerations: Only 1 account can be opened in own name or jointly with spouse. Account is to be opened within 3 months of receiving retirement benefits. Scheme is operated through branches of SBI and its subsidiaries and selected branches of nationalised banks.
[This scheme has been discontinued w.e.f. 10.07.2004 vide notification F. No.15-01/2004-NS-2, dated 09.07.2004.]
(Compiled by CA Sandeep Kanoi)
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LEAVE ENCSHMENT
Income Tax on Encashment of leave on retirement is different for Government employees and non-Government emp...loyees.
(i) Tax treatment for Government employees:
For a Government employee,whether retiring from Central Govt or State Govt , any amount received for encashment of accumulated leave at the time of retirement/superannuation is exempt from tax under section 10(10AA)(i).
(i) Tax treatment for non- Government employees
In case of non-Government employees , leave salary is exempt from tax under section 10(10AA)(ii) will be least of the following:
1. Period of earned leave in months (*) × Average monthly salary (**)
2. Average monthly salary (**) × 10 (i.e., 10 months’ average salary)
3. Maximum amount as specified by the Central Government i.e., Rs. 3,00,000 Different amounts (i.e., ceiling limits) are specified by the Government for different years.
However, for employees retiring after April 1, 1998 specified ceiling limit is Rs. 3,00,000.
4. Leave encashment actually received at the time of retirement.
GRATUITY
Income tax on Gratuity received at the time of retirement for Govt / Local Authority Employees is differently treated when compared with Non- Govt employees .
(A) Gratuity received by Government employees and employees of local authority [Section 10(10)(i)] is wholly exempt under section 10(10)(i). ( Not applicable for employees of statutory corporations )
(B) Gratuity received by non-Government employees will be different of employees covered by the Payment of Gratuity Act, 1972.
and employees not covered by the Payment of Gratuity Act, 1972.
(1) Exemption in respect of gratuity in case of employees covered by the Payment of Gratuity Act, 1972 [Section 10(10)(ii)]
will be lower of the following amounts :
1. 15 days’ salary (*) × years of service
2. Maximum amount specified by the Central Government, i.e., Rs. 10,00,000.
3. Gratuity actually received.
(*) Following points should be kept in mind : 7 days instead of 15 days in case of employees of a seasonal establishment 15 days’ salary = Salary last drawn × 15/26 Salary for this purpose will include basic salary and dearness allowance only.
(2) Exemption in respect of gratuity in case of employees not covered by the Payment of Gratuity Act, 1972 [Section 10(10)(iii)]
will be least of the following :
1. Half month’s average salary for each completed year of service, i.e., [Average monthly salary × ½] × Completed years of service. (*). 2. Maximum amount specified by the Central Government, i.e., Rs. 10,00,000
3. Gratuity actually received.
(*) Following points should be kept in mind : Average monthly salary is to be computed on the basis of average of salary for 10 months immediately preceding the month (not the day) of retirement.
COMMUTED PENSION
As per section 10(10A)(i), any commuted pension is exempt in the hands of a Government employee.
In case of non-Government employee exemption in respect of commuted pension will be as follows :
If the employee receives gratuity, one third of full value of commuted pension will be exempt from tax under section 10(10A)(ii)(a).
If the employee does not receive gratuity, one half of full value of commuted pension will be exempt from tax under section 10(10A)(ii)(b).
Following important points should be kept in mind :
For exemption in respect of pension in case of gallantry award winner and family members of armed forces refer to section 10(18) and 10(19). Family pension received by the family members of the employee after the death of the employee, is charged to tax in the hands of recipient under the head “Income from other sources”. In such a case, deduction of lower of 1/3rd of the amount of pension or Rs. 15,000 is available from such income. Relief under section 89 is available in respect of amount of commuted pension which is not exempt from tax.
VOLUNTARY RETIREMENT / SEPARATION
Compensation received at the time of voluntary retirement or separation is exempt from tax, if Compensation is received by an employee of an undertaking specified in section 10(10C) and Compensation is received in accordance with the scheme of voluntary retirement/separation, which is framed in accordance with prescribed guidelines. (for guidelines see Rule 2BA). Maximum amount of exemption is Rs. 5,00,000.
Where exemption is allowed to an employee under section 10(10C) for any assessment year, no exemption under this section shall be allowed to him for any other assessment year. Relief under section 89 is admissible in respect of such amount.
With effect from assessment year 2010-11, section 10(10C) has been amended to provide that where any relief has been allowed to an assessee under section 89 for any assessment year in respect of any amount received or receivable on his voluntary retirement or termination of service or voluntary separation, no exemption under section 10(10C) shall be allowed to him in relation to such, or any other assessment year.
PROVIDENT FUND
For accessing Tutorial from income Tax department regarding the subject along with illustrations ,
RELEVANT SECTIONS OF it ACT QUOTED ABOVE
Section 10AA ( i)
(i) any payment received by an employee of the Central Government or a State Government as the cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise ;
Section 10 (10AA ) ii :
(ii) any payment of the nature referred to in sub-clause (i) received by an employee, other than an employee of the Central Government or a State Government, in respect of so much of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise as does not exceed ten months, calculated on the basis of the average salary drawn by the employee during the period of ten months immediately preceding his retirement whether on superannuation or otherwise, subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government :
Provided that where any such payments are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under this sub-clause shall not exceed the limit so specified :
Provided further that where any such payment or payments was or were received in any one or more earlier previous years also and the whole or any part of the amount of such payment or payments was or were not included in the total income of the assessee of such previous year or years, the amount exempt from income-tax under this sub-clause shall not exceed the limit so specified, as reduced by the amount or, as the case may be, the aggregate amount not included in the total income of any such previous year or years.
Explanation.—For the purposes of sub-clause (ii),--
the entitlement to earned leave of an employee shall not exceed thirty days for every year of actual service rendered by him as an employee of the employer from whose service he has retired ;
Section 10 (i)
Any death-cum-retirement gratuity received under the revised Pension Rules of the Central Government or, as the case may be, the Central Civil Services (Pension) Rules, 1972, or under any similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all-India services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority or any payment of retiring gratuity received under the Pension Code or Regulations applicable to the members of the defence services ;
(ii) any gratuity received under the Payment of Gratuity Act, 1972 (39 of 1972), to the extent it does not exceed an amount calculated in accordance with the provisions of sub-sections (2) and (3) of section 4 of that Act ;
(iii) any other gratuity received by an employee on his retirement or on his becoming incapacitated prior to such retirement or on termination of his employment, or any gratuity received by his widow, children or dependants on his death, to the extent it does not, in either case, exceed one-half month's salary for each year of completed service, calculated on the basis of the average salary for the ten months immediately preceding the month in which any such event occurs, subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government :
Provided that where any gratuities referred to in this clause are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under this clause shall not exceed the limit so specified :
Provided further that where any such gratuity or gratuities was or were received in any one or more earlier previous years also and the whole or any part of the amount of such gratuity or gratuities was not included in the total income of the assessee of such previous year or years, the amount exempt from income-tax under this clause shall not exceed the limit so specified as reduced by the amount or, as the case may be, the aggregate amount not included in the total income of any such previous year or years.
Explanation.—In this clause, and in clause (10AA), "salary" shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule ;
Section : 10 (A)
(10A) (i) any payment in commutation of pension received under the Civil Pensions (Commutation) Rules of the Central Government or under any similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all-India services or to the members of the defence services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority or a corporation established by a Central, State or Provincial Act ;
(ii) any payment in commutation of pension received under any scheme of any other employer, to the extent it does not exceed--
(a) in a case where the employee receives any gratuity, the commuted value of one-third of the pension which he is normally entitled to receive, and
(b) in any other case, the commuted value of one-half of such pension,
such commuted value being determined having regard to the age of the recipient, the state of his health, the rate of interest and officially recognised tables of mortality ;
(iii) any payment in commutation of pension received from a fund under clause (23AAB) ;
Section : 10 ( 18 )
(18) any income by way of--
(i) pension received by an individual who has been in the service of the Central Government or State Government and has been awarded "Param Vir Chakra" or "Maha Vir Chakra" or "Vir Chakra" or such other gallantry award as the Central Government may, by notification in the Official Gazette, specify in this behalf;
(ii) family pension received by any member of the family of an individual referred to in sub-clause (i).
Explanation.--For the purposes of this clause, the expression "family" shall have the meaning assigned to it in the Explanation to clause (5);
Section : 10 (19)
(19) family pension received by the widow or children or nominated heirs, as the case may be, of a member of the armed forces (including para-military forces) of the Union, where the death of such member has occurred in the course of operational duties, in such circumstances and subject to such conditions, as may be prescribed;
Section 89 : Relief when salary, etc., is paid in arrears or in advance.
89. Where an assessee is in receipt of a sum in the nature of salary, being paid in arrears or in advance or is in receipt, in any one financial year, of salary for more than twelve months or a payment which under the provisions of clause (3) of section 17 is a profit in lieu of salary, or is in receipt of a sum in the nature of family pension as defined in the Explanation to clause (iia) of section 57, being paid in arrears, due to which his total income is assessed at a rate higher than that at which it would otherwise have been assessed, the Assessing Officer shall, on an application made to him in this behalf, grant such relief as may be prescribed28:
Provided that no such relief shall be granted in respect of any amount received or receivable by an assessee on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in sub-clause (i) of clause (10C) of section 10, a scheme of voluntary separation, if an exemption in respect of any amount received or receivable on such voluntary retirement or termination of his service or voluntary separation has been claimed by the assessee under clause (10C) of section 10 in respect of such, or any other, assessment year.
For a Government employee,whether retiring from Central Govt or State Govt , any amount received for encashment of accumulated leave at the time of retirement/superannuation is exempt from tax under section 10(10AA)(i).
(i) Tax treatment for non- Government employees
In case of non-Government employees , leave salary is exempt from tax under section 10(10AA)(ii) will be least of the following:
1. Period of earned leave in months (*) × Average monthly salary (**)
2. Average monthly salary (**) × 10 (i.e., 10 months’ average salary)
3. Maximum amount as specified by the Central Government i.e., Rs. 3,00,000 Different amounts (i.e., ceiling limits) are specified by the Government for different years.
However, for employees retiring after April 1, 1998 specified ceiling limit is Rs. 3,00,000.
4. Leave encashment actually received at the time of retirement.
GRATUITY
Income tax on Gratuity received at the time of retirement for Govt / Local Authority Employees is differently treated when compared with Non- Govt employees .
(A) Gratuity received by Government employees and employees of local authority [Section 10(10)(i)] is wholly exempt under section 10(10)(i). ( Not applicable for employees of statutory corporations )
(B) Gratuity received by non-Government employees will be different of employees covered by the Payment of Gratuity Act, 1972.
and employees not covered by the Payment of Gratuity Act, 1972.
(1) Exemption in respect of gratuity in case of employees covered by the Payment of Gratuity Act, 1972 [Section 10(10)(ii)]
will be lower of the following amounts :
1. 15 days’ salary (*) × years of service
2. Maximum amount specified by the Central Government, i.e., Rs. 10,00,000.
3. Gratuity actually received.
(*) Following points should be kept in mind : 7 days instead of 15 days in case of employees of a seasonal establishment 15 days’ salary = Salary last drawn × 15/26 Salary for this purpose will include basic salary and dearness allowance only.
(2) Exemption in respect of gratuity in case of employees not covered by the Payment of Gratuity Act, 1972 [Section 10(10)(iii)]
will be least of the following :
1. Half month’s average salary for each completed year of service, i.e., [Average monthly salary × ½] × Completed years of service. (*). 2. Maximum amount specified by the Central Government, i.e., Rs. 10,00,000
3. Gratuity actually received.
(*) Following points should be kept in mind : Average monthly salary is to be computed on the basis of average of salary for 10 months immediately preceding the month (not the day) of retirement.
COMMUTED PENSION
As per section 10(10A)(i), any commuted pension is exempt in the hands of a Government employee.
In case of non-Government employee exemption in respect of commuted pension will be as follows :
If the employee receives gratuity, one third of full value of commuted pension will be exempt from tax under section 10(10A)(ii)(a).
If the employee does not receive gratuity, one half of full value of commuted pension will be exempt from tax under section 10(10A)(ii)(b).
Following important points should be kept in mind :
For exemption in respect of pension in case of gallantry award winner and family members of armed forces refer to section 10(18) and 10(19). Family pension received by the family members of the employee after the death of the employee, is charged to tax in the hands of recipient under the head “Income from other sources”. In such a case, deduction of lower of 1/3rd of the amount of pension or Rs. 15,000 is available from such income. Relief under section 89 is available in respect of amount of commuted pension which is not exempt from tax.
VOLUNTARY RETIREMENT / SEPARATION
Compensation received at the time of voluntary retirement or separation is exempt from tax, if Compensation is received by an employee of an undertaking specified in section 10(10C) and Compensation is received in accordance with the scheme of voluntary retirement/separation, which is framed in accordance with prescribed guidelines. (for guidelines see Rule 2BA). Maximum amount of exemption is Rs. 5,00,000.
Where exemption is allowed to an employee under section 10(10C) for any assessment year, no exemption under this section shall be allowed to him for any other assessment year. Relief under section 89 is admissible in respect of such amount.
With effect from assessment year 2010-11, section 10(10C) has been amended to provide that where any relief has been allowed to an assessee under section 89 for any assessment year in respect of any amount received or receivable on his voluntary retirement or termination of service or voluntary separation, no exemption under section 10(10C) shall be allowed to him in relation to such, or any other assessment year.
PROVIDENT FUND
For accessing Tutorial from income Tax department regarding the subject along with illustrations ,
RELEVANT SECTIONS OF it ACT QUOTED ABOVE
Section 10AA ( i)
(i) any payment received by an employee of the Central Government or a State Government as the cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise ;
Section 10 (10AA ) ii :
(ii) any payment of the nature referred to in sub-clause (i) received by an employee, other than an employee of the Central Government or a State Government, in respect of so much of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise as does not exceed ten months, calculated on the basis of the average salary drawn by the employee during the period of ten months immediately preceding his retirement whether on superannuation or otherwise, subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government :
Provided that where any such payments are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under this sub-clause shall not exceed the limit so specified :
Provided further that where any such payment or payments was or were received in any one or more earlier previous years also and the whole or any part of the amount of such payment or payments was or were not included in the total income of the assessee of such previous year or years, the amount exempt from income-tax under this sub-clause shall not exceed the limit so specified, as reduced by the amount or, as the case may be, the aggregate amount not included in the total income of any such previous year or years.
Explanation.—For the purposes of sub-clause (ii),--
the entitlement to earned leave of an employee shall not exceed thirty days for every year of actual service rendered by him as an employee of the employer from whose service he has retired ;
Section 10 (i)
Any death-cum-retirement gratuity received under the revised Pension Rules of the Central Government or, as the case may be, the Central Civil Services (Pension) Rules, 1972, or under any similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all-India services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority or any payment of retiring gratuity received under the Pension Code or Regulations applicable to the members of the defence services ;
(ii) any gratuity received under the Payment of Gratuity Act, 1972 (39 of 1972), to the extent it does not exceed an amount calculated in accordance with the provisions of sub-sections (2) and (3) of section 4 of that Act ;
(iii) any other gratuity received by an employee on his retirement or on his becoming incapacitated prior to such retirement or on termination of his employment, or any gratuity received by his widow, children or dependants on his death, to the extent it does not, in either case, exceed one-half month's salary for each year of completed service, calculated on the basis of the average salary for the ten months immediately preceding the month in which any such event occurs, subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government :
Provided that where any gratuities referred to in this clause are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under this clause shall not exceed the limit so specified :
Provided further that where any such gratuity or gratuities was or were received in any one or more earlier previous years also and the whole or any part of the amount of such gratuity or gratuities was not included in the total income of the assessee of such previous year or years, the amount exempt from income-tax under this clause shall not exceed the limit so specified as reduced by the amount or, as the case may be, the aggregate amount not included in the total income of any such previous year or years.
Explanation.—In this clause, and in clause (10AA), "salary" shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule ;
Section : 10 (A)
(10A) (i) any payment in commutation of pension received under the Civil Pensions (Commutation) Rules of the Central Government or under any similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all-India services or to the members of the defence services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority or a corporation established by a Central, State or Provincial Act ;
(ii) any payment in commutation of pension received under any scheme of any other employer, to the extent it does not exceed--
(a) in a case where the employee receives any gratuity, the commuted value of one-third of the pension which he is normally entitled to receive, and
(b) in any other case, the commuted value of one-half of such pension,
such commuted value being determined having regard to the age of the recipient, the state of his health, the rate of interest and officially recognised tables of mortality ;
(iii) any payment in commutation of pension received from a fund under clause (23AAB) ;
Section : 10 ( 18 )
(18) any income by way of--
(i) pension received by an individual who has been in the service of the Central Government or State Government and has been awarded "Param Vir Chakra" or "Maha Vir Chakra" or "Vir Chakra" or such other gallantry award as the Central Government may, by notification in the Official Gazette, specify in this behalf;
(ii) family pension received by any member of the family of an individual referred to in sub-clause (i).
Explanation.--For the purposes of this clause, the expression "family" shall have the meaning assigned to it in the Explanation to clause (5);
Section : 10 (19)
(19) family pension received by the widow or children or nominated heirs, as the case may be, of a member of the armed forces (including para-military forces) of the Union, where the death of such member has occurred in the course of operational duties, in such circumstances and subject to such conditions, as may be prescribed;
Section 89 : Relief when salary, etc., is paid in arrears or in advance.
89. Where an assessee is in receipt of a sum in the nature of salary, being paid in arrears or in advance or is in receipt, in any one financial year, of salary for more than twelve months or a payment which under the provisions of clause (3) of section 17 is a profit in lieu of salary, or is in receipt of a sum in the nature of family pension as defined in the Explanation to clause (iia) of section 57, being paid in arrears, due to which his total income is assessed at a rate higher than that at which it would otherwise have been assessed, the Assessing Officer shall, on an application made to him in this behalf, grant such relief as may be prescribed28:
Provided that no such relief shall be granted in respect of any amount received or receivable by an assessee on his voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in sub-clause (i) of clause (10C) of section 10, a scheme of voluntary separation, if an exemption in respect of any amount received or receivable on such voluntary retirement or termination of his service or voluntary separation has been claimed by the assessee under clause (10C) of section 10 in respect of such, or any other, assessment year.
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