Is Pension Commutation on Superannuation Taxable - A Reader's Query

a) Superannuation taxability is based on certain criteria:

1. 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
2. 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
3. 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:

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