PENSION

SECTION 10(10A) A pension is a contract for a fixed sum to be paid regularly to a person, typically following retirement from service.

Commuted Pension: It is a lump sum payment in lieu

of monthly pension.

Uncommuted Pension: It is the left part after

commutation.

Important points:1) Uncommuted pension is always taxable. 2) Government employees includes employees of central government, state government, local authorities and statuary corporations. Commuted pension is taxable as under:In case of non govt. Employees:

Gratuity received/Not
Gratuity received

Exemption in respect of commuted pension

1/3rd of the entitlement of commutation of full pension is exempt. 1/2nd of the entitlement of commutation of full pension is exempt.

Gratuity not received

In case of govt. Employees: Entire commuted pension is exempt.

SPECIAL/NEW PENSION SCHEME Applicable from 1st january 2004. Applicable on new entrants to government service or any other employees. It is mandatory for all members/employees to contribute 10% of salary every month. A matching contribution is required to be made by employer. SALARY= BASIC SALARY + DA(To the extent covered under retirement benefits.) NOTE:
1) 2) Maximum deductible limit is 10% of salary under section 80CCD. Aggregate amount of deduction under 80C, 80CCC, 80CCD cannot exceed Rs.100000.

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