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I want to know whether recent retirement govt employee i.e retirement benefit yhas is pf, pension,gratuty is exempted from tax or not?

Ashim kr Ray (social service) (1695 Points)

10 March 2016

Sir,please let me know whether recent retirement govt employee the benefit got after retirement i.e retirement benefit is pf, pension,gratuity is exempted from tax or not? please kindly suggest what to do and how to calculate.

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shweta bhatter (CA) (173 Points)
Replied 10 March 2016

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.

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.

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.

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Ashim kr Ray (social service) (1695 Points)
Replied 10 March 2016

thank you one more question which ITR from has to been filled by the retirement employee i.e ITR 1 OR 2.

shweta bhatter (CA) (173 Points)
Replied 10 March 2016

ITR 1 AS ALL THE RETIREMENT BENEFITS ALSO COMES UNDER THE HEAD "INCOME FROM SALARY"

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Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDHA CENTER) (1372 Points)
Replied 10 March 2016

Due to pressure from opposition and Employees Unions, Central Government(P.M.Modi) withdraw the proposal to levy tax on 60% of P.F withdrawal (if withdraw made with in 5 Years from the date of Retirement) w.e.f 01.04.16. Hence P.F withdrawals made will not subject to Income tax.

Pension is of Two types- Commuted and Uncommuted. Uncommuted Pension is fully taxable whether Receipient is Government or Non Government employee. Commuted Pension (means withdrawal of pension amount either in full or part of his accumulations in Pension fund at once) is taxable for Non Government Employee. To align P.F with these Commuted Pension Provisions, Govt. has proposed for the same but failed to incorporate it in Finance act.

Gratuity: Gratuity received either at the time of Retirement and Death for Government employee is fully exempt from service tax

As Sri Shwetha Bhatter said I.T.R 1 is appropriate form. Note: I.T.R's does not vary whether Employee is Retired or Not. You have to consider different heads of Income you had. I.T.R 1 is for the assessee's who are having only Income under the head Salaries and Income(Not loss) from other sources(Interest not being in excess of Rs.10,000)

Ashim kr Ray (social service) (1695 Points)
Replied 10 March 2016

THANK YOU i.e if the retired person having only salary income and i have to filed the ITR 1 then no need to show the gratuity amount or the pension income and PF in the ITR 1 as it is fully exempted,
Am i right sir. PF can be shown in 80 C.as deduction.

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Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDHA CENTER) (1372 Points)
Replied 10 March 2016

Exempt Incomes should be shown in Return and Claim exemptions under Respective sections. For Providednt Fund, it is exempt u/s.10(11), For Gratuity u/s.10(10) and For Pension u/s.10(10A). I.T.R 1 is appropriate I.T Return.