I was working in a private sector company and retired recently. I receive a monthly pension from the Superannuation Fund (managed by LIC) as per the terms of my employment. The contribution to the superannuation fund was made by my employer. I also receive a monthly pension from EPFO under the Employees’ Pension Scheme 1995 and a monthly instalment from LIC in respect of my Jeevan Suraksha policy which I bought 12 years back. I receive a monthly pension from LIC in respect of my Pradhan Mantri Vaya Vandana Yojana. Kindly clarify under what head of income each of the above receipts is to be declared in the Income Tax return and whether there is any exemption applicable for any of the above receipts.
Answer: As per the income tax laws, any money or benefit received in connection with your employment present and past is taxed under the head salaries. This would include salaries received from present and past employers. It would also include pension received from a past employer or received in connection with past employment.
Since the contribution towards the superannuation fund was made by your employer the pension received by you from the Superannuation Fund managed by the LIC as per your terms of employment will be taxed under the head Salaries. Moreover, the pension received under the Employees’ Pension Scheme, 1995 will also be taxed under the head salaries as it is received due to contribution made by your employer to this scheme.
However, the pension received by you from LIC in respect of Jeevan Suraksha policy and Pradhan Mantri Vaya Vandana Yojana will be taxed under the head “Income from other sources” because these pensions do not have any connection with your past employment.
Salaried people are entitled to claim a standard deduction of up to ₹50,000/- against their salary income. This deduction is available even to people who have retired and are in receipt of any pension in connection with their past employment. So you will be able to claim a standard deduction of up to ₹50,000 against the taxable pension received under superannuation scheme as well as under the Employees’ Pension Scheme 1995. No deduction is available against the pension received from products bought by you.
Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on his X handle.
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Published: 07 Dec 2023, 01:00 PM IST