Income tax guidelines on exemption in respect of retirement advantages
I’ve taken voluntary retirement after 16 years of service. My firm has paid me an quantity of 12 lakhs as compensation and seven lakhs for go away encashed, pf and gratuity. What are the tax implications and the way can I save tax on it?
Any cash acquired beneath voluntary retirement scheme drawn up in accordance with prescribed guidelines is exempt upto a most restrict of Rs. 5 lakhs beneath Section 10(10C). So out of Rs. 12 lakhs acquired by you Rs. 7 lakhs will likely be taxable in your palms in case it’s framed as per the foundations.
There is an exemption of Rs. 3 lakhs for go away encashment topic nonetheless to a most of go away equal to 10 months. Please be aware that this exemption is out there in respect of go away encashment acquired by an individual from a number of employers throughout his complete lifetime. So in case you will have already availed any exemption for go away encashment previously, the eligible quantity of go away encashment for exemption will come all the way down to that extent. Likewise there may be an exemption of upto Rs. 20 lakhs for gratuity acquired from a number of employer by an individual. Since you haven’t offered the person break-up, it’s not doable for me to point the person exemption obtainable to you. The quantity of Provident Fund steadiness is absolutely tax free in your palms.
As far as choices to avoid wasting tax are involved, you will have restricted choices. In case you haven’t absolutely using the deduction beneath Section 80 C upto the utmost of Rs. 1.50 lakh you’ll be able to make investments upto Rs. 1.50 lakh both in senior citizen saving scheme or you’ll be able to put the cash in tax saving financial institution FD to the extent the identical is just not utilized. You may also declare tax advantages beneath Section 80 D in respect of medical insurance coverage premium upto Rs. 25,000/- for your loved ones in case you should not have any medical health insurance coverage. You may also avail extra deduction upto Rs. 50,000/- for medical health insurance of your mother and father if they’ve accomplished 60 years of age. You may also declare an unique deduction of Rs. 50,000/- in respect of contribution to NPS account beneath Section 80 CCD(1B).
Balwant Jain is a tax and funding skilled and will be reached on jainbalwant@gmail.com and @jainbalwant on Twitter
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