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Financial Planner - Answered on Mar 14, 2024

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Asked by Anonymous - Mar 13, 2024Hindi

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I have retired from a private company on 20/06/2023 after superannuation. I have subsequently received PF settlement amount and gratuity. As per from 16 issued by my employer for the 3 months period, my tax liability is nil. But I want to show the income of PF and Gratuity. Under which section these have to be shown as income and under which section these have to be claimed as exemption, while filing the ITR-1. Please help.

Ans: When filing your Income Tax Return (ITR-1) after retirement, you'll need to account for your income from Provident Fund (PF) and Gratuity. Here's how you can handle these components:

Provident Fund (PF):

• PF withdrawals are taxable if you have not completed five years of continuous service. However, if you've been employed for five years or more, PF withdrawals are tax-exempt.
• If your PF withdrawal is taxable, you should report it under the head ‘Income from Other Sources’ in your ITR-1 form.
• If your PF withdrawal is tax-exempt (due to more than five years of continuous service), you don't need to report it in your ITR as taxable income.

Gratuity:

• Gratuity received by an employee on retirement is exempt from tax up to a certain limit as per the Income Tax Act.
• The exemption for gratuity is calculated based on the formula: (15/26) * (last drawn salary) * (number of years of service).
• The maximum exemption limit for gratuity is Rs 20 lakh, as per the latest tax laws.
• If the gratuity amount you received is within the exemption limit, you don't need to report it in your ITR as taxable income.
• However, if the gratuity amount exceeds the exemption limit, the excess amount is taxable and should be reported under the head ‘Income from Salaries’ in your ITR-1 form.

Here's how you can report these incomes in your ITR-1 form:

• If both your PF withdrawal and gratuity fall within the exemption limits, you don't need to report them in your ITR-1 form.
• If any part of your PF withdrawal is taxable, report the taxable portion under ‘Income from Other Sources.’
• If any part of your gratuity is taxable (i.e., exceeds the exemption limit), report the taxable portion under ‘Income from Salaries.’

Remember to keep all relevant documents, such as Form 16, PF withdrawal statement, and gratuity payment details, handy while filing your ITR. If you're unsure about any specific details or calculations, consider consulting a tax advisor or chartered accountant for personalised guidance.

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.

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I am unemployed during FY 2019 to 2020. I had no salary income, I had my PPF account got matures during this year. I have own house as well as second house which is on rental. Which ITR form to be used for filling return. Also where PPF mature amount to be shown?

Ans: Even though there was no salary for FY2019-20, you need to file your returns if your taxable income is above the basic exemption limit due to the rental income. You can use the ITR -1 if there is a requirement.

While filing your income tax return (ITR), an individual is required to report incomes that are exempted from tax under the ‘Computation of income and tax’ tab in the online ITR-1 form.

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Question by Anonymous - Nov 27, 2020Hindi

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Where to show the Pension Income (Annuity) while filing one's ITR in the Income Tax Website - incometaxindiaefiling.gov.in. Shall be grateful for an early reply on the above matter.

Ans: If your pension is from a fund that your employer has contributed, it is to be filed under the head 'Income from Salaries'.

If on the other hand, you invested into an independent policy from your funds alone (without any contribution from your employer), then it is to be filed under 'Any other income' of the schedule 'Income from other sources'.

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