PENSION or Commuted Pension [Sec. 10(10A)]

 PENSION or Commuted Pension [Sec. 10(10A)]

Meaning of Pension –A pension is a retirement fund for an employee paid into by the employer, employee, or both, with the employer usually covering the largest percentage of contributions. When the employee retires, she's paid in an annuity calculated by the terms of the pension.

      Whatever pension is received by an employee (government or non government) after retirement it is chargeable under the head of salary.

Meaning of commuted Pension– Sometimes the employee wants to have a lump sum payment which he would have otherwise received monthly. The lump sum amount of pension which he received on foregoing the pension is known as a commuted pension. this is exempt from tax subject to the following limits.

• Pension receive from United Nation organisation by the employee of a family member– fully exempt

• Commuted pension receive by a government employee–fully exempt

•  Commuted pension received by other employee who also receive any gratuity – 1/3 of full value of Commuted pension will be exam from tax 

• Commuted pension received by other employee who do not receive any gratuity– 1/2 of full value of Commuted pension will be exam from tax

•  Family pension received by the family member of armed forces– fully exempt

•  Family pension received by family members in any other case –(taxable under other sources) 33.33% of family pension subject to maximum rupees 15000 salary exempt from tax.