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Commuted? or uncommuted pension?

Anonymous (-) (279 Points)

14 July 2017

How to know whether pension is commuted or uncommuted? If a person withdraws the entire remaining pension amount (33.33%) in the 3rd year, is it commuted or uncommuted? Is it possiple to commute part of you pension, more than once? How would exemption on commuted pension, then be calculated?

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8 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (161308 Points)
Replied 14 July 2017

Commuted Pension which is lump sum payment received at the time of retirement
Commuted Pension received by Government employees is not taxable.
Non government employees, who receive Gratuity along with Commuted Pension, get a tax exemption of up to 1/3rd of the total amount so commuted.
Non government employees who do not receive Gratuity, exemption amount from tax is 1/2 of the total Commuted Pension received.
Uncommuted pension which is monthly pension received by employee after retirement.
Monthly pension received by an employee is taxable.
Family pension received after the death of the employee is taxable as ‘Income from Other Sources’. 1/3rd of the pension amount or Rs. 15,000/-, whichever is lower, is exempt from tax.
Family pension received by the family of armed force employee after his death is exempted from tax.

Refer: /forum/what-is-commuted-and-uncommuted-pension--176821.asp

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (161308 Points)
Replied 14 July 2017

First check: the catagory of employer........

For Goverment employee the commuted pension is tax free. & For non governmental employee commuted pension received (without gratuity) in any year is 50% free. So whatever amount is withdrawn, half of it is taxable in the year of withdrawal.

Anonymous (-) (279 Points)
Replied 14 July 2017

Non govt org. Person retired 2 yrs back and has been receiving pension. Current year remaining pension has been withdrawn i.e. Rs 3lakh i.e. 33%. I have considered it as commuted and calculated exemption as (3L/33%)/2. Is this correct?

Dhruv Shah (Article Student) (357 Points)
Replied 14 July 2017

If you had not received gratuity, than Yes, your calculation is right. that means the pension received by you will be totally exempt as it is the lowest amount.
Amount exempt will be lower of:
1. Actually Received (i.e 300000)
2. 1/2 of total pension (i.e 450000)

jvratnam (Others) (109 Points)
Replied 15 July 2017

I RECEIVED PENSION FROM EMPLOYEES P.F ORGANISATION, GOVT. OF INDIA . (EPFO ) 900 P.M i.e RS 10,800 LAST FY UNDER EMPLOYEES PENSION SCHEME 1995... THIS CAN NOT BE COMMUTED. I HAVE OTHER TAXABLE INCOME FROM DEPOSITS IN BANK AND RENTAL INCOME . I COME UNDER TAX BRACKET. I AM SHOWING THE ENTIRE PENSION AS TAXABLE . IS THIS CORRECT ? CAN I CLAIM ANY DEDUCTION OF 33% FROM PENSION AS THIS IS NOT COMMUTED .

Dhruv Shah (Article Student) (357 Points)
Replied 15 July 2017

No. Uncommuted pension is taxable for all.
Exemption is available in commuted pension only.

Anonymous (-) (279 Points)
Replied 15 July 2017

Is it possible to commute 20% at the time of retirement, receive 60% uncommuted and then in tge last year commute the remaining 20%. If so, would exempt commuted pension be calculated as (pension received/20%)/2, in both years that pension is commuted?

Viswa nath (Sales professional) (60 Points)
Replied 31 December 2020

Sir,

Is 1/3 commutation (receiving gratuity) taxable for LIC Group Super annuation - (contribution paid entirely by employee only) . Resigned from Private firm after 10+ years of contribution to the fund.

LIC has deducted 30% tax on my commutation. (say 1 Lac Tax levied on 3 lacs commuted pension)

Can I show the entire Commutation [3 Lacs] under ITR-2 > EI Sheet > Other Exempt income.. & claim refund.

Kindly reply as due date is nearing.