Superannuation fund isn't a taxable until employee is entitled to receive it. - AAR

IT/ILT/AAA: Employer's contribution to the superannuation fund assures only future benefit to employees and they do not get any vested right at the time of making contribution to the fund - Therefore, such contribution could not be treated as taxable perquisite in the hands employee until they are entitled to receive it

Facts:

•            The Royal Bank of Scotland ('Applicant') was established in Netherlands. Its Indian branch established a superannuation fund for providing pension to its eligible employees under a 'Defined Benefit Plan'.
•            The applicant seeks Advance Ruling on the issue whether tax was to be deducted under Sec. 192 on the contribution made to the superannuation fund (for an amount exceeding Rs. 1,00,000 per employee) as perquisite?
•            The Revenue contended that as per section 17(2)(vii), any contribution made by employer to the superannuation fund in excess of Rs. 1,00,000 to be treated as perquisite in the hands of an employee. Hence, the applicant was liable to deduct tax at source under section 192.

The Authority held in favour of applicant as under:

1.            The AS-15 defines 'Defined Benefit Plan' as a plan in which amount contributed was invested to earn some return to ensure that employees would get pension as per the pre-defined formula.
2.            Employer's contribution to the superannuation fund assures only future benefit to employees and they didn't get any vested right at the time of making contribution to the fund. Thus, such contribution could not be treated as taxable perquisite in the hands employee until he was entitled to receive it
3.            Mere insertion of a Sec. 17(2)(vii) didn't make any significant departure from this aspect. Thus, applicant wasn't required to deduct tax at source on contribution made to superannuation fund.

Source: www.taxmann.com

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How much Gratuity, Voluntary Retirement and Commuted Pension is Exempted from Income Tax?

Where retirement benefits as gratuity is received more than once, either from one employer or more than one employer, or either in the same previous year or over several previous years, then the total gratuity exemption cannot exceed the statutory limit applicable as on the date of his retirement or becoming incapacitated prior to such retirement or his death or whose employment is terminated on or after that date.

Pension refers to an arrangement to provide the employee with an income when he is no longer earning a regular income from employment, i.e., post employment.

Such pensions are normally in the form of monthly or annual payments, i.e., Un-commuted Pension. However, at the option of the Employee, such monthly / annual pensions can be received in lump sum, either in one time or more than one time, i.e., Commutation of Pension.

Gratuity :

GRATUITY – SECTION 10(10)
a) Any Death-cum-Retirement gratuity to Govt. Employees : Wholly exempt.

b) Any gratuity received by the employees covered under Payment of Gratuity Act, 1972. Least of the following is exempt:-

• 15 days salary (7 days in case of seasonal employment) for each completed year of service or part in excess of 6 months.
• Rs. 3,50,000.
• Amount of gratuity actually received

c) Any other gratuity, (not covered under (a) or (b)): Least of the followings is exempt:-

• Rs 3,50,000
• Half month’s salary for each completed year of service
• Amount of gratuity actually received.

Voluntary Retirement :

PAYMENT RECEIVED ON VOLUNTARY RETIREMENT SECTION 10 (10C):

Any amount received by an employee of a Public Sector Company or of any other company at the time of voluntary retirement is exempt to the extent such amount does not exceed Rs. 5 lacs, provided the scheme of such voluntary retirement is in accordance with the guidelines prescribed under rule 2BA of Income Tax Rules 1962. If an exemption has been allowed under this section for any assessment year, no exemption there under is allowable in relation to any other assessment year. Further, the benefit of the exemption has been extended to employees of an authority established under a Central, State or Provincial Act, or a local authority or to employees of a Co-operative society, university, Indian institute of Technology and notified Institute of Management.

Commuted Pension :

A) Government Employees : Wholly exempt.

B) Non-Govt. Employees :

• Where the employee receives gratuity, amount not exceeding the commuted value to the extent of 1/3rd of the pension is exempt.
• In other cases : the commuted value of ½ of pension is exempt.

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Senior Citizen Saving Scheme have any Extension for Deduction u/s. 80C.

It is general demand that regarding the transfer of money by cheque to HUF account as an unsecured Loans. In turn, the HUF account invests it in fixed deposit. What is the income tax liability in such transaction?

If any member of the HUF transfer his own assets to HUF without consideration (i.e., throw his assets to the common hotchpotch), income from such assets would be taxable in the hands of individual transferring the assets and not in the hands of HUF [Section 64(2)].

If you give interest bearing loans to your HUF, Income earned by the HUF out of the funds so advanced will be taxable as income of the HUF only and will not attract the clubbing provision of section 64(2).

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Exemption of Tax on Retirement Salary and Income Tax Sections.

This is general demand of every employee who will be retired in this financial year that which retirement salary is exempt from that and what is the section of exemption. In this regard there are 5 (five) Salary component gives to Salaried Employee (Central Government/State Government Employee), which are mentioned below. Normally salaried Employee thinks that retirement salary is fully exempted from Income Tax. Thus see the tax treatment of various components of salary normally received by an employee at the time of retirements are as under:

Provident Fund:

Lump sum payment received from Statutory Provident Fund received by the Central/State/Semi State Government employee is fully exempted from Income Tax u/s 10(12).

Gratuity:

In the case of Central/State/Semi State Government employee, Gratuity amount is exempt from Income Tax u/s 10(10)(i) of the Income Tax Act, 1961.

Commutation of Pension :

Commuted pension received by a employee who has joined the Central Government before 01.01.2004 and State/Semi State Government employee joined before 01.11.2005 is fully exempt from tax u/s 10(10A)(i).

Encashment of Leave Salary :

In the case of Central/State/Semi State Government employee, any amount received as cash equivalent of leave salary in respect of period of earned leave at his credit at the time of retirement/superannuation is exempt from tax u/s 10(10AA)(i)

Dearness Allowance/Pension :

It is taxable. Even the arrears received is also taxable. However, in respect of arrears, assessee can claim a relief u/s 89(1).

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Official Gazette for Non-Filing of Income Tax Return whose Salary Income upto Rs. 5.00 Lakhs.

As per demand of site visitors, the notification/press release regarding Exemption for filing of Income Tax Return w.e.f. Assessment year 2011-12 and onwards.

No.402/92/2006-MC (14 of 2011)
Government of India / Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
***

New Delhi, dated the 23rd June, 2011

PRESS RELEASE

The Central Board of Direct Taxes has notified the scheme exempting salaried taxpayers with total income up to Rs.5 lakh from filing income tax return for assessment year 2011-12, which will be due on July 31, 2011.

Individuals having total income up to Rs.5,00,000 for FY 2010-11, after allowable deductions, consisting of salary from a single employer and interest income from deposits in a saving bank account up to Rs.10,000 are not required to file their income tax return. Such individuals must report their Permanent Account Number (PAN) and the entire income from bank interest to their employer, pay the entire tax by way of deduction of tax at source, and obtain a certificate of tax deduction in Form No.16.

Persons receiving salary from more than one employer, having income from sources other than salary and interest income from a savings bank account, or having refund claims shall not be covered under the scheme.

The scheme shall also not be applicable in cases wherein notices are issued for filing the income tax return under section 142(1) or section 148 or section 153A or section 153C of the Income Tax Act 1961.

Latest Notification regarding Exemption to File Income Tax Return for Assessment Year 2012-13(Click Here)

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Important Information about Family Pension and Income Tax.

I would like to share with you an important information regarding Family pension and Income Tax because near about 25% employee who earned Family pension income between or over taxable Limit and thus they are in confusion whether they pay tax or not. In this matter, look the following explanation:

1. Family pension is not totally exempted. It is taxable under "Income from other Sources" head along with below deduction .
2. Deduction under section 57 (iia) is allowed

• 1/3 of the Family Pension.
• Rs. 15,000.00

1. No TDS Deductions u/s 192 because Family Pension is not a Salary

As per income tax act, detail is given as under:

10[(iia) in the case of income in the nature of family pension, a deduction of a sum equal to thirty-three and one-third per cent of such income or 11[fifteen] thousand rupees, whichever is less.
Explanation.For the purposes of this clause, family pension means a regular monthly amount payable by the employer to a person belonging to the family of an employee in the event of his death ;]

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Income Tax Exemption Limit Increased from 1.80 to 3 Lakhs.

In order to provide the much needed relief to people, a Parliamentary panel scrutinising the Direct Taxes Code (DTC) Bill has suggested raising the income tax exemption limit to Rs 3 lakh and also hiking deduction on savings to Rs 2.5 lakh.

"The committee has adopted the report. It only needs to dot the i's and cross the t's. The report will be submitted within a week...possible ahead of the (Budget) Session", sources said after the meeting of the Parliamentary Standing Committee on Finance said.

The report, which will pave the way for debate and passage of the DTC Bill by Parliament, has also suggested retaining the corporate tax rate at 30 per cent.

It suggested there should be three tax slabs at 10 per cent, 20 per cent and 30 per cent for personal income tax .

The DTC, which will replace the Income Tax Act, 1961 and modernise the direct tax structure in the country, was referred to the Committee headed by senior BJP leader and former Finance Minister Yashwant Sinha for scrutiny in August 2010.

The government, pending approval of the DTC Bill by Parliament, is likely to introduce some measures concerning taxes in the forthcoming Budget itself to be presented by Finance Minister Pranab Mukherjee in the Lok Sabha on March 16.

The Budget Session of Parliament will begin on March 12 with President Pratibha Patil addressing the joint sitting of Members of the Lok Sabha and the Rajya Sabha.

As regards the income tax exemption limit, the Committee did not favour the suggestions of some members who wanted it to be raised to Rs 5 lakhs. It later reached a consensus on suggesting the limit of Rs 3 lakh, up from Rs 1.8 lakh currently.

The income tax exemption in the original DTC Bill has been proposed at Rs 2 lakh.

At present, income in the bracket of Rs 1.80 lakh -Rs 5 lakh attracts 10 per cent tax, those in Rs 5 lakh -Rs 8 lakh 20 per cent, and above Rs 8 lakh at 30 per cent.

The Committee, sources said, favours raising the limit for the total tax saving deductions, which include investment in provident fund, life insurance, children education and infrastructure bonds, to Rs 2.5 lakh from Rs 1.2 lakh.

At present, investments up to Rs 1 lakh in specified instruments are deducted while calculating the tax liability.

In addition, investments up to Rs 20,000 in infrastructure bonds are also exempted from tax.

Raising the tax exemption and savings deduction limits, sources said, was necessary to compensate people reeling under the impact of high rate of inflation.

Although the inflation has in recent months come down to 7-8 per cent, it had remained near the double-digit mark for most of 2011.

PTI New Delhi March 3, 2012

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Extend Amount of Allowances of Transport and Blind/Handicapped Per Month Under Clause 14 of Section 10.

Many salaried employees are getting Transport Allowance but they are not aware about the rule of exemption from Income Tax under clause (14) of Section 10. This type of allowance can be paid by Employer to meet out the expenditure for the purpose computing between the residence to duty place etc.  Detail of rule regarding Transport Allowance, Blind/Handicapped Allowance with extent limit are given as under :

Sr.No	Name of Allowance	Name of Allowance  Allowance is   exempt	Extent to which Allowance is   exempt
46[10.	Transport allowance granted to an employee 47[other than an employee referred to in serial number 11] to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty	Whole of India	Rs. 800 per month.]
48[11.	Transport allowance granted to an employee, who is blind or orthopaedically handicapped with disability of lower extremities, to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty	Whole of India	Rs. 1,600 per month.]

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Exemption of Tax on Receipts by members from HUF u/s. 10(2) of Income Tax

What are the exemption of Tax on Receipt by members from HUF u/s. 10(2) of Income Tax, for this, see the following:

Receipts by members from H.U.F: any sum received by an assessee in his capacity as a member of a H.U.F is exempt from tax to avoid double taxation as H.U.F is also assessable separately on its income in its own capacity. The sum should be received in the capacity as a member of an H.U.F. I the recipient is not a member of the H.U.F., he cannot claim the exemption. The sum should be received either out of the income of the H.U.F or out of the income of imputable estate owned by the H.U.F under section 10(2).

The ownership of impartible estate through belongs to the joint family but the income therefrom belongs solely and absolutely to the holder of the estate. The holder of the estate is assessable as an individual in respect of the estate income. The senior most male member succeeds to the impartible estate by law of primogeniture but the junior male members may have the right to maintenance out of the income from the impartible estate. Hence the exemption has been provided if any sum is received by the member of HUF out of the income from impartible estate.

Position of member in HUF: only those members of the HUF can claim exemption who can either claim a share of partition or who are entitled to maintenance under Hindu law and thus have an interest in the joint income of the HUF[Kadar narian singh vs. CIT(1938) 6 ITR 157.

Conversion of separate property into HUF property cannot be exempt: where a member of the HUF coverts his separate property into HUF property after 31 December 1969 without adequate consideration, the income of such property is included in the total income of such member under section 64(2) of income tax act. No exemption can be claimed for such income.

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Upto 10 Lakh Gratuity Amount exempt from Income Tax

As per Notification Notification No. 43/2010 [F.No.200/33/2009-ITA.I], dated 11-6-2010 of The Central Board of Direct Taxes upto 10 lakh rupees as the maximum amount of gratuity entitled to exemption under sub-clause (iii) of clause (10) of section 10 of the Income Tax Act 1961 is exempt from Income Tax

The notification will be applicable to employees who retire, or become incapacitated before retirement, or expire, or whose services are terminated, on or after the 24th May 2010.

Notification
No. 43/2010 [F.No.200/33/2009-ITA.I], dated 11-6-2010

In exercise of the powers conferred by sub-clause (iii) of clause (10) of section 10 of the Income-tax Act, 1961 (43 of 1961), and in supersession of Ministry of Finance, Department of Revenue, notification no. S.O. 287 dated the 20th January, 1999 the Central Government, having regard to the maximum amount of any gratuity payable to its employees, hereby specifies ten lakh rupees as the limit for the purpose of the said sub-clause in relation to the employees who retire or become incapacitated prior to such retirement or die on or after the 24th day of May, 2010 or whose employment is terminated on or after the said date.

This is set Back for PSU employee who was retired between 01.06.2006 to 23.05.2010 and getting Enhanced Limit of Gratuity 10 lakh as per Recommendation of Sixth pay commission .As they are getting 10 Lakh rs from 01.01.2006 or 01.01.2007 as the case may be but now new exemption limit is available for PSU employess who has retired after 24.05.2010.So person retired between 01.01.2006 to 23.05.2010 have to pay tax on gratuity received more than 3.5 Lach Rupees. Section 10(10)(iii) of the Income-tax Act, 1961 - Gratuity - Gratuity exemption limit raised to Rs.10 lakhs.

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