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What is commuted and uncommuted pension?


Can anyone please explain, what is commuted and uncommuted pension?. How it is to be treated while calculating tax liability for AY 2011-12 Thankyou

 
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Chartered Accountant


commuted pension means the lumpsum amount received and uncommuted means which is received in instalments


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Following is exempted from Commuted pension:

1/3 of the total pension.(If he also receives gratuity) or 2/3 of total pension(If he doesnt receive any gratuity)

Uncommuted pension is always taxable.


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Thankyou Sir, Why is it related to gratuity?, Calculation of taxable pension differs, if gratuity received, and it will be different if gratuity not received.. Please clarify, Amit Sir..

 
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╭∩╮(︶-︶)╭∩╮


It is related to gratuity because for calculating the exemption for Pension u/s 10(10A) , if the assesse who has received gratuity also then his exemption limit is

Commuted amount / % of commutation x 100 x1/3

 

Otherwise

Commuted amount / % of commutation x 100 x1/2

 

Those who receive gratuity also, receive less exemption on pension


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Thanks Amit sir, Saliza, Z, for clearing my doubt, Thanks CCI

 
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Uncommuted pension -  Fully taxable

Commuted pension -

  a) Govt employee - Fully exempted

  b) Non - Govt employee ( received gratuity also ) - 1/3 of Full value of pension

  c) Non - Govt employee ( not received gratuity ) -    1/2 of Full value of pension


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COMMUTED PENSION :   CERTAIN % OF  PENSION TO BE RECEIVED IN FUTURE IS COMMUTED

BY   THE  RETIRED ONE. WHAT EVER THE AMOUNT COMMUTED RECEIVED IN LUMSUM IS

EXEMPTED IN THE HANDS OF GOVT EMPLOYEES.

IN CASE OF PRIVATE EMPLOYEES 1/3 OR 1/2 OF PENSION WHICH HE IS ENTITLED TO

RECEIVE IS EXEMPTED.

EG. PRIVATE EMPLOYEE COMMUTED 25% & COMMUTED PENSION IS  rS. 50000. THE 1/3 OR 1/2

OF (50000/25%)  IS EXEMPTED.

UN COMMUTED PENSION:  WHICH MEANS REGULAR AMOUNT OF PENSION RECEIVED BY

RETIRED ONE EVERY MONTH  WHIS IS TAXBLE AS SALARY .

 

KIRAN KUMAR TULVA


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