Senior Citizens Please note:
Sri D.D. Mistry reports following guides
Tax Planning For Senior Citizens
Exemption Limits:
Pension
o Uncommuted pension is taxable as salary
o Commuted pension is exempt – up to 1/3 if in receipt of gratuity also or up to ½ if not in receipt of gratuity.
Gratuity
o Gratuity received in excess of limits specified is taxable – the current limit is 3,50,000.
Leave Encashment
o Leave encashment in excess of limits specified is taxable.
o - in case of a Central or State Govt. employee – fully exempted
. Leave encashment actually received;. Cash equivalent of earned leave not exceeding 30 days for each year of service at his credit on retirement;. Ten months average salary; or. Rs.3,00,000 (from 01-04-1998 onwards)
Retrenchment Compensation
o Any compensation received on retrenchment, in excess of limit specified is taxable.
Payment of Voluntary Retirement
o Any payment, subject to a maximum of Rs.5 lakhs and conditions specified
Superannuation Fund
o Payment from an approved superannuation fund under specified conditions and limits specified is exempt.
Payment from Provident Fund
o Recognised Provident Fund – Accumulations are exempt subject to the conditions therein.
o The Basic Exemption Limit for persons of 65 years and above is set higher at Rs.1,85,000.
Tax Planning of Retirement Benefits
§ Security of investment, liquidity, adequate regular return, cover on life / accident cover or tax benefits are the factors that help in planning retirement benefits
§ The basic exemption limit of 1 lakh or 1.85 lakhs(for persons of 65 years or above) should be considered to ensure that the income on investment lie within the limits.
§ Savings could be opted either in investments, the income from which are totally exempt or in other investments, to claim deduction
§ Consider
Senior Citizens Savings Scheme, 2004, carrying interest @ 9% p.a. (taxable) –
§ Conditions:
§ Multiples of Rs.1000, limited to the amount of retirement benefits or 15 lakhs, whiever is lower.
§ By individuals of 60 years or above.
§ By individuals between 55 and 60 years of age and have retired on superannuation
§ Investment to be made within 1 month of the date of receipt of retirement benefits.
§ Interest payable quarterly
§ Premature closure permitted after expiry of one year from the date of opening - a deduction of 2% shall be made if the account is closed before three years and 1% shall be made if the account is closed after three years and the balance paid to the depositor. No deduction on premature closure on account of death.
§ Account will mature on expiry of five years from the date of opening - can be extended for a further period of three years, by applying within one year of maturity.
Annuity plans of LIC – Jeevan Dhara and Jeevan Akshay are eligible for deduction
6 year Post Office Monthly Income Scheme
. Maximum investment shall be Rs.3,00,000
. Interest @8% p.a. is paid every month in cash or deposited in the PO saving bank account.
. Deposited amount is repayable after one year from the date of initial deposit after deducting 2% of the amount deposited, after two years from the date of initial deposit after deducting 1% of the amount deposited, simultaneously stopping the monthly interest being paid after three years from the date of initial deposit (full amount deposited ), simultaneously stopping the monthly interest being paid.
. Interest earned and the amount received on closure/maturity are to be included in the taxable income.
. Interest earned and the amount received on closure/maturity are to be included in the taxable income.
Dineshchandra D. Mistry,
General Secretary,
BSNL & DoT Pensioners Association & ASG FNTO ND
C-11, Suvarnadham Avenue, Near Pink City,
Ranip, Ahmedabad 382480
TF Union Office:079-25500800 (R) 079-27521400
Cell: 9879090682
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