shailesh (director) 14 December 2021
Kawmini Liyanage 15 December 2021
To answer your query tax relief under Section 88 of INCOME TAX ACT of 1995 should be read along with section 10(A). According to it, (1/3) one-third of the proceedings of maturity amount will be exempted from taxes (tax free). But the limitation in this regard is that only 25% of this amount can be withdrawn.
Aryan Raj 15 December 2021
In response to your query,
For government personnel, the commuted pension is completely tax-free.
A non-government employee who receives both a pension and a gratuity is free from paying 1/3 of the commuted pension. The rest, like their wage, is taxed.
If a non-government employee just earns a pension and not a bonus, he or she is excused from paying 50% of the commuted pension.
Commuted pensions received by the employee's family members are tax-free up to 1/3 of the pension amount or Rs. 15,000 in a financial year, whichever is lesser.
Pensions received by military family members or UNO personnel are likewise tax-free.
If a taxpayer's commuted pension exceeds the above-mentioned restrictions, the excess pension is fully taxable in the assessment year in question.
Section 89 of the Internal Revenue Code provides some tax relief to such taxpayers. To claim benefits under Section 89, however, you must file Form 10E.
It shouldn't be difficult to grasp the taxability of your commuted pension now that you understand the scenarios in which it is taxed, tax-free, or partially exempt.