04 July 2012
4.16 APPROVED SUPERANNUATION FUND It means a superannuation fund which has been and continues to be approved by the Commissioner in accordance with the rules contained in Part B of the VIth Schedule to the Income-tax Act, 1961. The tax treatment of contribution and exemption of payment from tax are as follows: (i) Employer’s contribution is exempt from tax in the hands of employee but taxable in the hands of the employer (only in respect of such contribution exceeding Rs.1,00,000 per employee per annum) under the provisions of fringe benefit tax; (ii) Employee’s contribution qualifies for deduction under section 80C; (iii) Interest on accumulated balance is exempt from tax. Section 10(13) grants exemption in respect of payment from the fund— (a) to the legal heirs on the death of beneficiary (e.g. payment to widow of the beneficiary) or (b) to an employee in lieu of or in commutation of an annuity on his retirement at or after the specified age or on his becoming incapacitated prior to such retirement, or (c) by way of refund of contribution on the death of the beneficiary or, (d) by way of refund of contribution to an employee on his leaving the service in connection with which the fund is established otherwise than in the circumstances mentioned in (b), to the extent to which such payment does not exceed the contribution made prior to April 1, 1962. For example, where the amount received by an employee does not include any contribution made prior to 1.4.1962, the whole amount is taxable.
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