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54-Year-Old Facing Superannuation Scheme Changes: Will 33% Withdrawal Attract Tax?

T S Khurana |391 Answers |Ask -Follow

Tax Expert - Answered on Nov 23, 2024

A certified management accountant since 1993, T S Khurana is a fellow member of The Institute of Cost Accountants of India. His areas of expertise are income tax, specifically litigation cases, and GST.

Since the last 21 years, he has also been providing expert advice on financial matters, including investments and diversification of funds, and wealth building in the long term to his clients.
He believes that investment in real estate is the safest way for better returns and wealth generation over a period of time.

A former chairman of the Chandigarh Chapter of Institute of Cost Accountants of India, T S Khurana has also served as member of its technical committee.... more

Asked by Anonymous - Nov 20, 2024Hindi

I have superannuation schrme with presemt employer and they have discountinued the same. I sm of age 54 years now and employer asked to withdraw 33% fund and balance fund will convert in pension scheme. I have question that this 33% fund will attract tax as per Invome tax of Indian Govt?

Ans: 01. Payment of 33% of Fund being received at the time of Voluntary Retirement/Superannuation is taxable under the head "Income from Salary." However, a maximum of Rs.5,00,000.00 is exempted u/s 10(10)(C), subject to certain conditions. Since your question does not specify the nature of Job, the Company in which you served, Length of service & Whether the scheme of Superannuation is approved or not etc,, it is difficult to give you a clear view.
Most welcome for any further clarifications. Thanks.

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Question by Bipin - Aug 26, 2022Hindi

I have query on Superannuation. As I am looking completing 15 years of service and if I resign now following queries are coming to my mind: a) Is Superannuation exempted from Tax? If yes, what is the limit? b) What is procedure of Transferring Superannuation to next company? In the same way, please confirm on the gratuity component.

Ans:

a) Superannuation taxability is based on certain criteria:

If you are withdrawing the superannuation amount while leaving the company, the entire amount will be subjected to tax. This will be accounted as income from other sources, added the income and taxed as per your tax slab
If payment is made to the employee as an annuity after the retirement: 1/3^rd of amount will be tax free and the remaining annuity will be taxed as per your tax slab at retirement
It is not taxable if payment is made to the employee who is incapacitated by a disability or illness, or other reasons or payments made after death of employees to legal heirs

If both the parties (old and new employer) agree, then you can transfer the amount to new employer, provided the new company has an approved superannuation fund. If not, you can continue keeping the money in the existing superannuation account.

b) Gratuity is exempt from tax on the least of the following:

Up to 20 lakh currently: Last salary (basic + DA)* number of years of employment* 15/26
Actual Gratuity received
For government employees, gratuity is fully exempt from tax.

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