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Exempted Incomes (Tax-FREE): Section-10(10CC),Sec-10(10D),Sec-10(11),Sec-10(12),Sec-10(13)

 

21.    Income by way of tax on perks [Section 10(10CC)]

Perquisites to employees mean any facility provided by the employer to the employees. There are two types of perquisites, viz., monetary and non-monetary. Value of perquisite is charged to tax in the hands of the employees, however, the employer may at his will pay tax (on behalf of employees) on such perquisites. In such a case, the amount of tax paid on such perquisites by the employer on behalf of the employees will be treated as income of the employees and is charged to tax in his (i.e., in employee’s) hands. However, by virtue of section 10(10CC) tax paid by employer (on behalf of employee) on non-monetary perquisites will be exempt from tax in the hands of employees.

 

Such tax paid by the employer shall not be allowed as a deductible expenditure in the hands of employer under section 40. Section 10(10CC) provides exemption only in respect of tax on nonmonetary perquisites. In other words, this section does not provide exemption in respect of perquisites or tax paid on monetary perquisites

 

22.    Any sum received under a life insurance policy [Section 10(10D)]

Any sum received under a life insurance policy, including the sum allocatedby way of bonus on such policy shall be fully exempted in following cases :

  1.      If any sum received from insurance company on insurance of a dependent handicapped member [under subsection (3) of section 80DD]

  2.      If any sum received from insurance company when a dependent, or a member of family is suffering from a notified disease [under subsection (3) of section 80DDA]

  3. Any sum received under a Key man insurance policy “Key man insurance policy” means a life insurance policy taken by a person on the life of another person who is or was the employee of the first mentioned person or is or was connected in any manner whatsoever with the business of the first mentioned person ; or

  4.  Any sum received under an insurance policy issued on or after the 1st day of April, 2003 but before 1-4-2012 in respect of which the premium payable for any of the years during the term of the policy exceeds twenty per cent of the actual capital sum assured.

  5.      Any sum received under an insurance policy issued on or after 1-4-2012 in respect of which the premium payable for any of the years during the term of the polcy exceeds 10% of the actual capital sum assured. Thus, in case of life insurance policies issued on or after 1-4- 2012, the exemption regarding any sum received under a life insurance policy shall be allowed only if premium paid on such a policy does not exceed 10% of the capital sum assured.

Note. Any sum received in respect of policies covered under points (iv) and (v) above shall be fully exempt if such sum is received on the death of the person (i.e., policy holder).

Raising the limit of premium for the LIC policies of persons with disability or disease for exemption of sum received [Sec l0(1OD)] [w.e.f A.Y. 2014-15].

For persons suffering from disability (u/s 80U) or certain diseases, the exemption of any sum received under LIC policy, shall be available if the premium for the policy does not exceed 15% (earlier 10%) of the capital sum assured. The increased limit of premium shall be applicable in respect of LIC policies issued on or after
1-4-2013.

Amendment in Explanation-1 section 10 (1OD) regarding key man insurance policy.

A key man insurance policy which has been assigned to a person during its term with or without consideration shall continue to be treated as a key man insurance policy for the purpose of section 10 (10D).

For the purpose of calculating the actual capital sum assured effect shall be given to the following :

  1.      of the value of any premiums agreed to be returned, or

  2.      of any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person. [Explanation to sub-section (2A) of section 88 and sub-section 3 of section 80C] .

23. Payment from Statutory Provident Fund [Section 10(11)]

 

Statutory Provident Fund

Employer’s Contribution

Employer’s contribution to such fund is not treated as income of the employee

Interest

Interest credited to such fund is exempt in the hands of the employee.

Amount received at the time of termination

Lump sum amount received from such fund, at the time of termination of service is exempt in the hands of employees.

 

24. Payment from Recognised Fund [Section 10(12)]

The accumulated balance due and becoming payable to an employee participating in a recognised provident fund, is exempt to the extent provided in rule 8 of part A of the Fourth Schedule.

Recognised Provident Fund

Employer’s Contribution

Employer’s contribution to such fund, up to 12% of salary is not treated as income of the employee (see Note 1).

Interest

Interest credited to such fund up to 9.5% per annum is exempt in the hands of the employee, interest in excess of 9.5% is charged to tax in the hands of the employee.

Amount received at the time of termination

If certain conditions are satisfied, then lump sum amount received from such fund, at the time of termination of service, is exempt in the hands of employees. (see Note 2)

 

Un-Recognised Provident Fund

Employer’s Contribution

Employer’s contribution to such fund is not treated as income of the employee.

Interest

Interest credited to such fund is exempt in the hands of the employees.

Amount received at the time of termination

(See note 3)

 

                                                           

Public  Provident Fund

Employer’s Contribution

Employers do not contribute to such fund

Interest

Interest credited to such fund is exempt.

Amount received at the time of termination

Lump sum amount received from such fund at the time of termination of service is exempt from tax

.

Notes:

1. Salary for this purpose will include basic salary, dearness allowance, if the terms of service so provide and commission based on fixed percentage of turnover achieved by the employee.

2. Accumulated balance paid from a recognised provident fund will be exempt from tax in following cases:

 

(a)       If the employee has rendered a continuous service of 5 years or more. If the accumulated balance includes amount transferred from other recognised provident fund maintained by previous employer, then the period for which the employee rendered service to such previous employer shall also be included in computing the aforesaid period of 5 years.

 

(b)       If the service of employee is terminated before the period of 5 years, due to his ill health or discontinuation of business of the employer or other reason beyond his control.

 

(c)        If on retirement, the employee takes employment with any other employer and the balance due and payable to him is transferred to his individual account in any recognised fund maintained by such other employer, then the amount so transferred will not be charged to tax.

 

Except above situations, payment from a recognised provident fund will be charged to tax considering such fund as un-recognised from the beginning (See note 3 given below for tax treatment of un-recognised provident fund).

 

3.         Treatment of payment (at the time of termination) from un-recognised provident fund:

 

Payment on termination will include 4 things, viz., employee's contribution and interest thereto and employer’s contribution and interest thereto, the tax treatment of such payment is as follows:

 

       Employee's contribution is not chargeable to tax; interest on employee contribution is taxed under the head “Income from other sources”.

 

       Employer's contribution and interest thereon are taxed as salary income, however, an employee can claim relief under section 89 in respect of such payment.

 

30.     Payment from the National Pension System Trust to an employee [Section 10(12A)]

Any payment from the National Pension System Trust to an employee on closure of account or his opting out of the pension scheme referred to in section 80CCD, to the extent it does not exceed 40 % of the total amount payable to him at the time of closureor his opting out of the scheme, is exempt from tax.

25. Payment from Superannuation Fund [Section 10(13)]

Approved superannuation fund means superannuation fund which is approved by the Commissioner of Income-tax. Tax treatment of such fund is as follows:

 

       Employer’s contribution is exempt from tax, however, from assessment year 2010-11 employer’s contribution in excess of Rs. 1,50,000 per annum is charged to tax as perquisite. Employee’s contribution qualifies for deduction under section 80C and interest on accumulated balance is not liable to tax.

 

       Payments made from the fund are exempt from tax under section 10(13) in following cases:

 

       Payment on death of beneficiary; or

 

       Payment to employee in lieu of, or in commutation of an annuity on his retirement at or after the specified age or on his becoming incapable prior to such retirement; or

 

       Payment by way of refund of contributions on the death of a beneficiary; or

 

       Payment to employee by way of refund of his contributions on 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; or

 

       Payment to employee by way of transfer to his account under a pension scheme referred to in section 80CCD.

 
More Topics... @ Exempted Incomes
Exempted Incomes : Sec.10(1) to Sec.(4)(ii)
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Exempted Incomes : Section-10(10)-Sec-10(A)-Sec-10(AA)-Sec-10(B)
Exempted Incomes : Section-10(10BB)-Sec-10(10BC)-Sec-10(C)
Exempted Incomes : Section-10(10CC),Sec-10(10D),Sec-10(11),Sec-10(12),Sec-10(13)
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