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Pension is the amount received after retirement by employee.

Normally,it is received monthly or quarterly.

However,sometimes,employee says that he doesnot want monthly pension .He instead asks for lumpsome payment.

This lumpsome payment is called Commuted pension

 Also,sometimes,employee commutes only part of his pension.Hence he receives both 

  • Lumpsome Payment (called Commuted Pension)
  • Monthly Pension (called Uncommuted Pension)

 Hence we can say,pension is of 2 types

  • Commuted Pension
  • Uncommuted Pension 

 

 

Taxability

 

 Uncommuted Pension  Commuted Pension
 It refers to pension received periodically.(Monthly ,Quarterly or Annually) It  means lump sum amounttaken by commuting the whole or partof the pension.
   
Taxability  Taxability

For All types of Employees

It is fully TAXABLE for all

It is exempt as follows

For Central Government /State Government

Employees or Member of Defence Forces

Fully Exempt

 

For Other Employees

There can be 2 cases

1.If Employee gets Gratuity Also

1/3 of Amount Received if he had commuted

whole of pension

2.If Employee Does not get Gratuity

1/2 of Amount Received if he had commuted

whole of pension 

   

Pension -Commuted and Uncommuted Pension - Taxability Of Retirement Benefits

 

  1. Income Tax
  2. Income from Salaries
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About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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