Amount paid on life insurance
policy [Section 10(10D)]
As per section 10(10D), any amount received under a life insurance
policy, including bonus is exempt from tax. Following points should be noted in
this regard:
· Exemption is available only in respect of
amount received from life insurance policy.
· Exemption under section 10(10D) is
unconditionally available in respect of sum received for a policy which is
issued on or before March 31, 2003. However, in respect of policies issued on
or after April 1st, 2003, the exemption is available only if the amount of
premium paid on such policy in any financial year does not exceed 20% (10% in
respect of policy taken on or after 1st April, 2012) of the actual capital sum
assured. With effect from 1-4-2013, in respect of policy taken in the name of a
person suffering from diseases specified under section 80DDB or in the name of
a person suffering from disability specified under section 80U, the limit will
be increased to 15% of capital sum assured.
· Value of premium agreed to be returned or of
any benefit by way of bonus (or otherwise), over and above the sum actually
assured, which is received under the policy by any person, shall not be taken
into account while calculating the actual capital sum assured.
· Amount
received on death of the person will continue to be exempt without any
condition.
Note: No exemption would be available in case of any sum received under
section 80DD(3) or under Keyman insurance policy.
Exemption in respect of amount
received from public provident fund/statutory provident fund/ recognised
provident fund/ un-recognised provident fund [Section 10(11)/(12)]
The tax treatment of various items
in case of different provident funds is as follows:
Statutory
Provident Fund Employer’s
Employer’s
Contribution
|
Employer’s
contribution to such fund is not treated as income of the employee.
|
Interest
|
Interest credited
to such fund is exempt in the hands of the employee.
|
Amount
received at the time of termination
|
Lump sum
amount received from such fund, at the time of termination of service is
exempt in the hands of employees.
|
Recognised
Provident Fund
Employer’s
Contribution
|
Employer’s
contribution to such fund, up to 12% of salary is not treated as income of
the employee (see Note 1).
|
Interest
|
Interest
credited to such fund up to 9.5% per annum is exempt in the hands of the
employee, interest in excess of 9.5% is charged to tax in the hands of the
employee.
|
Amount
received at the time of termination
|
If certain
conditions are satisfied, then lump sum amount received from such fund, at
the time of termination of service, is exempt in the hands ofemployees. (see
Note 2)
|
Un-recognised
Provident Fund
Employer’s
Contribution
|
Employer’s contribution to such fund is not treated as income of the
employee.
|
Interest
|
Interest credited to such fund is exempt in the hands of the
employees.
|
Amount received at
the time of termination
|
(See note 3)
|
Public
Provident Fund
Employer’s
Contribution
|
Employers do not contribute to such fund.
|
Interest
|
Employers do not contribute to such fund.
|
Amount received at
the time of termination
|
Lump sum amount received from such fund at the time of termination of
service is exempt from tax.
|
Notes:
1. Salary for this purpose will
include basic salary, dearness allowance, if the terms of service so provide
and commission based on fixed percentage of turnover achieved by the employee.
2. Accumulated balance paid from a recognised provident fund will be
exempt from tax in following cases:
(a) If the employee has rendered a continuous service of 5 years or more.
If the accumulated balance includes amount transferred from other recognised
provident fund maintained by previous employer, then the period for which the
employee rendered service to such previous employer shall also be included in
computing the aforesaid period of 5 years.
(b) If the service of employee is terminated before the period of 5
years, due to his ill health or discontinuation of business of the employer or
other reason beyond his control.
(c) If on retirement, the employee takes employment with any other
employer and the balance due and payable to him is transferred to his
individual account in any recognised fund maintained by such other employer,
then the amount so transferred will not be charged to tax.
Except above situations, payment
from a recognised provident fund will be charged to tax considering such fund
as un-recognised from the beginning (See note 3 given below for tax treatment
of un-recognised provident fund).
3. Treatment of payment (at the time of termination) from un-recognised
provident fund:
Payment on termination will include 4 things, viz., employee's
contribution and interest thereto and employer’s contribution and interest
thereto, the tax treatment of such payment is as follows:
·
Employee's contribution is not chargeable to tax; interest on employee
contribution is taxed under the head “Income from other sources”.
· Employer's contribution and interest thereon
are taxed as salary income, however, an employee can claim relief under section
89 in respect of such payment.
As per section 10(11A), any payment from an account opened in accordance
with the Sukanya Samriddhi Account Rules, 2014 made under the Government
Savings Bank Act, 1873 is exempt from tax. In other words, interest and
withdrawals from such account will be exempt from tax under section 10(11A).
Payment from the National Pension
System Trust to an employee [Section 10(12A)]
Any payment from the National Pension System Trust to an assessee on
closure of account or his opting out of the pension scheme referred to in
section 80CCD, to the extent it does not exceed 40 % of the total amount
payable to him at the time of closure or his opting out of the scheme, is
exempt from tax.
With effect from April 01, 2020, 60 % of the amount payable shall be
exempt from tax.
Partial withdrawal from NPS [Section 10(12B)]
To provide relief to an employee
withdrawing partial amount from National Pension System (NPS) Trust. A new
clause (12B) is inserted under section 10 with effect from assessment year
2018-19 to provide that the withdrawal from NPS will not be chargeable to tax
if the following conditions are satisfied:-
1. Amount of withdrawal should not exceed 25% of total contribution made
by an employee in NPS.
2. Partial withdrawal should be made in accordance with the terms and
conditions specified under the Pension Fund Regulatory and Development
Authority Act, 2013 and the regulations made thereunder.
Payment from approved
superannuation fund in specified circumstances and subject to certain limits
[Section 10(13)]
Approved superannuation fund means superannuation fund which is approved
by the Commissioner of Income-tax. Tax treatment of such fund is as follows:
· Employer’s contribution
is exempt from tax, however, from assessment year 2010-11 employer’s
contribution in excess of Rs. 1,50,000 per annum is charged to tax as
perquisite. Employee’s contribution qualifies for deduction under section 80C
and interest on accumulated balance is not liable to tax.
· Payments made from the fund are exempt from
tax under section 10(13) in following cases:
1. Payment on death of beneficiary; or
2. Payment to employee in lieu of, or in commutation of an annuity on his
retirement at or after the specified age or on his becoming incapable prior to
such retirement; or
3. Payment by way of refund of contributions on the death of a
beneficiary; or
4.Payment to employee by way of
refund of his contributions on leaving the service in connection with which the
fund is established otherwise than by retirement at or after a specified age or
on his becoming incapacitated prior to such retirement; or
5. Payment to employee by way of transfer to his account under a pension
scheme referred to in section 80CCD.
House rent allowance [Section 10(13A)]
As per section 10(13A), read with rule 2A, the exemption in respect of
HRA will be lower of the following amounts:
(1) 50% of salary, when residential house is situated at Mumbai, Kolkata,
Delhi or Chennai and 40% of salary where residential house is situated at any
other place.
(2) HRA actually received by the employee in respect of the period during
which rental accommodation is occupied by the employee during the previous
year.
(3) Rent paid in excess of 10% of salary.
Salary will include basic salary, dearness allowance forming part of
salary while computing all retirement benefits and commission based on fixed
percentage of turnover achieved by the employee. Apart from this, salary for
this purpose does not include any other allowances/perquisites.
Salary for this purpose shall be computed on due basis in respect of
period during which the accommodation is occupied by the employee in the
previous year. Hence, any payments not pertaining to the previous year or not
pertaining to the period of occupation of the accommodation shall be excluded.
Lease rent of an aircraft [Section
10(15A)]
Lease rent of an aircraft or an
aircraft engine paid to a foreign Government or to a foreign enterprise by an
Indian company, engaged in the business of operation of aircraft is not taxable
in the hands of such foreign Government or non-resident concern, if such
payment is in pursuance of an agreement (approved by the Central Government)
made before April 1, 1997 or after March 31, 1999 but before April 1, 2007. If
such agreement is entered into during April 1, 1997 and March 31, 1999 or after
March 31, 2007, then exemption under section 10(15A) is not available. However,
in such a case, if tax on such payments is borne by the payer, then tax so
borne by the payer is exempt in the hands of payee under section 10(6BB),
provided agreement is approved by the Central Government.
Educational scholarship [Section
10(16)]
Any amount received as educational scholarship (i.e., scholarship to meet
the cost of education is exempt from tax in the hands of recipient).
Daily allowance to a Member of
Parliament [Section 10(17)]
Following allowances are exempt
from tax in the hands of a Member of Parliament and a Member of State
Legislature—
• Daily allowance received by a Member of Parliament or by a Member of
State Legislature or by member of any committee thereof.
• Any other allowance received by a Member of Parliament under the
Members of Parliament (Constituency Allowance) Rules, 1986.
• Any Constituency allowance received by a Member of State Legislature.
Awards [Section 10(17A)]
Any payment received in pursuance
of following (whether paid in cash or in kind) is exempt from tax:
·
Any award instituted in the public interest by the Central Government or State Government
or by any other body approved by the Central Government in this behalf.
· Any reward by the Central
Government or any State Government for such purpose as may be approved by the
Central Government in this behalf in the public interest.
Pension to gallantry award winner
[Section 10(18)]
Pension received by an individual who was employee of the Central
Government or State Government and who has been awarded Param Vir Chakra or
Maha Vir Chakra or Vir Chakra or any other notified gallantry award is exempt
from tax.
Family pension received by any member of such
individual is also exempt.
Need any assistance than
No comments:
Post a Comment