07 June 2019
Budget 2018 introduced Standard Deduction u/s 17(2)viii upto max upto Rs 40,000 for Salaried class. If a taxpayer has received a pension/superannuation annuity from his former employer, it is treated as income under the head ‘Salaries’ and Standard Deduction is allowed in FY 2018-19. A taxpayer upon his retirement, is receiving Pension / annuity every month from LIC against Pension & Group Scheme under a master Superannuation Annuity Plan by his past private employer. The query is whether this superannuation annuity received by him (treated as Income under the head - Salaries), will be eligible for Standard Deduction? Since LIC does not deduct any tax at source, no certificate will be issued by LIC as regards exemption under Standard Deduction. .
07 June 2019
As per Section 13 of the I-T Act 1961, any payment from an approved superannuation fund will be exempt provided that the payment is made to an employee in lieu of or in commutation of an annuity on his retirement. You will not be liable to pay tax on receipt of one-third of the accumulated balance received. Annuity which you will receive on a periodic basis in future will be taxable as an income under the head ‘Salaries’. You will be eligible to claim standard deduction of Rs 40,000 from the said taxable ‘Salary’.
CAclubindia
