Income tax rebate
This query is : Resolved
05 September 2011
I retired from bank 10years ago,accepting PF.Now bank has offered Pension on condition of repaying bank's contribution of PF PLUS 56%of the said PF amount.This 56%is fresh payment(aboutRs.175000)Can i claimIncome Tax exemption under any section of IT for thisextra amount i paid now.please help.
joseph_kalathur@yahoo.com
joseph_kalathur@yahoo.com
06 September 2011
Yes you can claim rebate on this amount
Section 89 of the Indian Income Tax provides rebate to salaried individuals for receiving any portion of their salary in arrears or in advance or profit in lieu of salary (“additional salary”). When arrears of salary pertaining to any earlier years are paid in subsequent period then the taxpayer moves to a higher marginal tax. This section provides for tax relief of extra tax burden due to higher tax rate margin.
When does the provision become applicable?
Where salary is received in arrear or in advance or any portion of family pension is received by an assessee in arrears.
Where any compensation for termination of employment is received after continuous employment for three years or more provided the employee has remaining at least three year of service.
Where any gratuity is received in respect of past service of five years or more
Where any payment in commutation of pension is received.
Amount to be claimed as relief
The tax payable by the assessee on his total income of the previous year in which the salary is received in arrears or in advance, shall be reduced by the amount by which the tax on total income excluding such additional salary for the relevant previous year exceeds the tax on total salary including additional salary of that previous year for which the additional salary is being received.
Section 89 of the Indian Income Tax provides rebate to salaried individuals for receiving any portion of their salary in arrears or in advance or profit in lieu of salary (“additional salary”). When arrears of salary pertaining to any earlier years are paid in subsequent period then the taxpayer moves to a higher marginal tax. This section provides for tax relief of extra tax burden due to higher tax rate margin.
When does the provision become applicable?
Where salary is received in arrear or in advance or any portion of family pension is received by an assessee in arrears.
Where any compensation for termination of employment is received after continuous employment for three years or more provided the employee has remaining at least three year of service.
Where any gratuity is received in respect of past service of five years or more
Where any payment in commutation of pension is received.
Amount to be claimed as relief
The tax payable by the assessee on his total income of the previous year in which the salary is received in arrears or in advance, shall be reduced by the amount by which the tax on total income excluding such additional salary for the relevant previous year exceeds the tax on total salary including additional salary of that previous year for which the additional salary is being received.
06 September 2011
Thank you Mr Agarwal for the very prompt response.
One part of my question still not resolved.
let me explain .I have retired from the bank under the then existing scheme of PF as the retirement benefit,(I was not eligible for Pension )Accordingly I received the full PF amount with interest at my retirement in 2001(under VRS)
During 2009-10 all banks offered to their retired staff a fresh chnace to opt for Pension with the condition that the staff should REFUND/REPAY 50%of the PF received by him at the time of his retirement along with AN ADDITIONAL AMOUNT at 56%of the said amount.To give an example if one has got total PF of RS600000/-,he should REPAY RS.300000 plus AN ADDITIONAL AMOUNT of Rs168000/-being 56 $ of the said amount as fresh CONTRIBUTION to PF.
Please note that here I am NOT RECEIVING it ,but I am PAYING Rs 168000/- to the bank in lumpsum to become eligible fot the NEW PENSION SCHEME(instead of monthly instalments which one does while in service)
Now my query is, whether i can claim REBATE unde 80C or any other section for the amountof 168000 which I have now PAID to the bank management .Can it be traeted as investment for TAX Rebate within the overall limit of 100000/-
Please advise
One part of my question still not resolved.
let me explain .I have retired from the bank under the then existing scheme of PF as the retirement benefit,(I was not eligible for Pension )Accordingly I received the full PF amount with interest at my retirement in 2001(under VRS)
During 2009-10 all banks offered to their retired staff a fresh chnace to opt for Pension with the condition that the staff should REFUND/REPAY 50%of the PF received by him at the time of his retirement along with AN ADDITIONAL AMOUNT at 56%of the said amount.To give an example if one has got total PF of RS600000/-,he should REPAY RS.300000 plus AN ADDITIONAL AMOUNT of Rs168000/-being 56 $ of the said amount as fresh CONTRIBUTION to PF.
Please note that here I am NOT RECEIVING it ,but I am PAYING Rs 168000/- to the bank in lumpsum to become eligible fot the NEW PENSION SCHEME(instead of monthly instalments which one does while in service)
Now my query is, whether i can claim REBATE unde 80C or any other section for the amountof 168000 which I have now PAID to the bank management .Can it be traeted as investment for TAX Rebate within the overall limit of 100000/-
Please advise
19 September 2011
Hello
waiting for a response
regards
waiting for a response
regards
31 July 2024
The scenario described involves you, a retired bank employee, opting into a new pension scheme that required you to repay a portion of the Provident Fund (PF) amount received at retirement, along with an additional contribution. Here's the analysis of the tax treatment of these payments under the Income Tax Act, 1961:
### 1. Repayment of PF Amount
The repayment of 50% of the PF amount received at the time of retirement is essentially a reversal of the earlier received benefit. This repayment, unfortunately, does not qualify for any deduction under Section 80C or any other section of the Income Tax Act.
### 2. Additional Contribution to PF
The additional amount you paid (56% of the PF amount received) to become eligible for the new pension scheme might be viewed differently. Here are the key points to consider:
- **Investment in Pension Fund**: Section 80C allows a deduction for contributions made towards certain pension schemes. This includes the investment in new pension schemes notified by the Central Government.
- **Eligible Deduction**: If the bank's new pension scheme qualifies under the notified pension schemes by the government, then the additional contribution (Rs. 1,68,000) could be claimed as a deduction under Section 80C, subject to the overall limit of Rs. 1,50,000 for the financial year.
### Steps to Claim Deduction
1. **Check Scheme Eligibility**: Verify if the bank's new pension scheme is notified under the eligible pension schemes as per the Income Tax Act.
2. **Document Proof**: Maintain proper documentation of the payment made, including any communication from the bank about the scheme and receipts for the payment made.
3. **Declare in ITR**: While filing your Income Tax Return, declare the amount paid under Section 80C. Note that the maximum limit for deduction under Section 80C is Rs. 1,50,000.
### Conclusion
To summarize:
1. The repayment of Rs. 3,00,000 (50% of PF) does not qualify for any tax deduction.
2. The additional contribution of Rs. 1,68,000 might qualify for a deduction under Section 80C, provided the new pension scheme is a notified scheme under this section.
It's advisable to consult with a tax professional or your bank's tax advisor to confirm the eligibility of the scheme under Section 80C and ensure proper documentation for claiming the deduction.
### 1. Repayment of PF Amount
The repayment of 50% of the PF amount received at the time of retirement is essentially a reversal of the earlier received benefit. This repayment, unfortunately, does not qualify for any deduction under Section 80C or any other section of the Income Tax Act.
### 2. Additional Contribution to PF
The additional amount you paid (56% of the PF amount received) to become eligible for the new pension scheme might be viewed differently. Here are the key points to consider:
- **Investment in Pension Fund**: Section 80C allows a deduction for contributions made towards certain pension schemes. This includes the investment in new pension schemes notified by the Central Government.
- **Eligible Deduction**: If the bank's new pension scheme qualifies under the notified pension schemes by the government, then the additional contribution (Rs. 1,68,000) could be claimed as a deduction under Section 80C, subject to the overall limit of Rs. 1,50,000 for the financial year.
### Steps to Claim Deduction
1. **Check Scheme Eligibility**: Verify if the bank's new pension scheme is notified under the eligible pension schemes as per the Income Tax Act.
2. **Document Proof**: Maintain proper documentation of the payment made, including any communication from the bank about the scheme and receipts for the payment made.
3. **Declare in ITR**: While filing your Income Tax Return, declare the amount paid under Section 80C. Note that the maximum limit for deduction under Section 80C is Rs. 1,50,000.
### Conclusion
To summarize:
1. The repayment of Rs. 3,00,000 (50% of PF) does not qualify for any tax deduction.
2. The additional contribution of Rs. 1,68,000 might qualify for a deduction under Section 80C, provided the new pension scheme is a notified scheme under this section.
It's advisable to consult with a tax professional or your bank's tax advisor to confirm the eligibility of the scheme under Section 80C and ensure proper documentation for claiming the deduction.
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