Live Course on Drafting of Appeal and Reply of Penalty Notice by CA Sachin Sinha. Register Now!!

TAXABILITY OF SUPERANNUATION

(Guest)

Superannuation is paid by the Company to its employees in the current year on which FBT has been already deposited in the earlier years.

As per new perquisite rules, is such a payment chargable to Tax in the hands of Employees [assuming it is not exempt under 10(13)]

Reply
Follow
Share

10 Replies

Vivek Angrish (Manager Finance & Accounts) (232 Points)
Replied 04 March 2010

Good Question, but in my opinion it should not to be taxed, as if it is taxed in the hands of employees also, then it will be double taxation,

Let's see the replies of other also

(Guest)

I too have the same answer Mr. Angrish. Since Double Taxation is attracted, taxability in the hands of Employees shouls be avoided.

shailendra (C.A. FINAL) (189 Points)
Replied 04 March 2010

My view is little different on this issue:

According to section 36 only the payments which are made to an approved superannuation fund is allowed to the employer. It means it is mandatory to get the fund approved to claim the contribution in the fund. If the fund is unapproved then the employer will not get the deduction.

Now when the employer makes the payments to an employee from an UNAPPROVED fund then it will be taxable in the hands of the employee not leading to double taxation.

When the payment is made from an APPROVED fund then no question of taxability in the hands of employee because it is exempt in sec 10(13).

Thus there cannot be double taxation in any case.

However there can be a case which will lead to double taxation i.e. when the payment is made to the employee in excess of the exemption granted in section 10(13). In this case it will obviously lead to double taxation and there is not other option available unless and untill any circular or notification specifically exempts this case.

Please correct if have gone wrong in any point.

(Guest)

Well, since we are here to share our views, we have to analyze everyone's point. So, Mr. Shailendra, you are correct too. After detailed analysis of the same, the following is being concluded:

TAXABILITY OF SUPERANNUATION IN THE HANDS OF EMPLOYEE ON WHICH FBT HAS ALREADY BEEN PAID BY THE EMPLOYER

Section 10(13) of the Income Tax Act, 1961 states:

Any payment from an approved superannuation fund made

(i) On the death of a beneficiary; or

(ii) To an employee in lieu of or in commutation of an annuity on his retirement at or after a specified age or on his becoming incapacitated prior to such retirement; or

(iii) By way of refund of contributions on the death of a beneficiary; or

(iv) By way of refund of contributions to an employee on his leaving the service in connection with which the fund is established otherwise than by retirement at or after a specified age or on his becoming incapacitated prior to such retirement, to the extent to which such payment does not exceed the contributions made prior to the commencement of this Act and any interest thereon;

Shall not be included in the computation of the total Income of the previous year of any person.

Also, Rule 6 of Part B of the Fourth Schedule to the Act states:

Where any contributions made by an employer, including interest on contributions, if any, are paid to an employee during his lifetime [in circumstances other than those referred to in clause (13) of section 10], [tax] on the amounts so paid shall be deducted at the average rate of [tax] at which the employee was liable to [tax] during the preceding three years or during the period, if less than three years, when he was a member of the fund, and shall be paid by the trustees to the credit of the Central Government within the prescribed time and in such manner as the Board may direct.

Now, the question arises

(a) Whether such amount is taxable in the hands of the employee.

(b) Whether the employer is liable to deduct TDS on the same.

Since the aforementioned amount is not covered under Section 10(13) and no other Section provides for Exemption of the same, it is thus treated as an Income and consequently taxable in the hands of the employee.
Since FBT has already been paid by the employer on the contribution amount, it is not a taxable in the hands of the employee. (Double Taxation). However with the amendment in the Perk rules, repayment of the same is taxable in the hands of the employee. And since no Circular/Notifications or Clarification has been issued by CBDT for the exemption/taxability of the same, abiding the nature of Law, TDS should be deducted.
Moreover, if the amount is included in the salary income, it is subjected to the provisions of Section 192 of the said Act.

Goutam Biswas (Assistant) (30 Points)
Replied 27 October 2012

My employer deducted the TDS on superannuation refund to me in the FY 2011-12 as well as issued the Form 16 accordingly. The said amount shown u/s 17(3) in the Form 16. At the time filing online return, if I showed total salary income excluding the said amount and claim the refund to I. Tax authority. Accordingly Intimation u/s 143(1) already issued and I got refund. IS IT LEGAL ? WHATEVER I DID, IS IT CORRECT WAY? WOULD I BE PUNISHABLE IN FUTURE ? HOW THE INCOME TAX AUTHORITY ASSESSED ME NOT VERIFING FORM 16 ? DID I MADE AN WRONG ? PLEASE REPLY IMMEDIATE SO THAT I CAN SUBIT RECTIFICATION TO AUTHORITY.

REGARDS.

Goutam Biswas (Assistant) (30 Points)
Replied 31 October 2012

Nobody is there yet to reply against my aksing ? Kindly do me the favour.

N.S. RANGANAYAKULU (CA Practice ) (21 Points)
Replied 12 October 2015

Plz let me know as to what is the exact tax treatment for Superannuation recd by the Employee during the FY 15-'16?

sandeep kumar (assistence article) (1 Points)
Replied 21 July 2016

Hi, I am going through the same confusion. Please le me know if amount received from Supper Annuation Fund is taxable u/h salary or not?

If yes, what is the detail of employer to be filled in ITR 2.

Thanks

Anya (Professional) (32 Points)
Replied 11 July 2018

Hi All,

My query is somewhat different than the above discussion.But, I even though i am presenting the case. A pensioner gets monthly receipt of 15000/- from LIC linked super annuation fund. There is no commuted pension. Where I should show it in ITR-1? Taxable or not? If any other information is required , please let me know.

Regards..

Samir Kumar Das (AGM) (22 Points)
Replied 07 February 2019

The annual contribution by the employer was more than Rs. 1.5 lacs and the contribution of more than Rs. 1.5 lacs was already taxed in respective years. Will on withdrawal do I still have to pay tax on the contributions exceeding Rs. 1.5 lacs on which I have already paid tax?