Commuted Pension

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Ashish

CHARTERED ACCOUNTANTS

24 Points Posted on 03 October 2010

Kindly Give me the answer of the following question:

It relates to salary head of income tax act.

A person who does not entitled to gratuity, commutes his pension in past with 30%. Now he wants to commute again with 25% of its total pension in the previous year he shall be allower exemption to the extent of ____?

option is 1) Nil 2) 25% 3) 20%

a right ans is 20%. If any one knows the logic behind it kindly give comments on it.

Replies (5)

Ashish M

Chartered Accountant

2103 Points Posted on 03 October 2010

In a case where the person is not in reciept of the gratuity amount, he is entitled to exemption of upto 50% of the total commuted pension amount.

In ur case, the person is already exhausted 30% of the exemption in his first case.... so on the second time.. he will be eligible to only 20% of the left out exemption (50%-30%).

For eg. In ur case, let say he recieved 30% of pension as Rs.90... so total commuted pension would be Rs.300 (90/30%). Exemption in ur case is 50% as per Sec.10(10A) i.e. Rs.150.

He already took exemption of upto 30% i.e. Rs.90.... So next time on getting Rs.75 as 25% of the total commuted pension... since he has already claimed exemption of Rs. 90... so this time he wud be left with Rs. 60 to claim as exemption i.e. (150-90).. which is exactly 20% of the total commuted pension..!!!!