Provisions of section 10(10A) provide exemption towards the commuted value of a pension. Under the present article, we would understand the exemption available under section 10(10A) of the Income Tax Act. However, before understanding the exemption, it is important to understand the term ‘commuted pension’ and ‘uncommuted pension’ which is explained hereunder:
Simply putting up, the pension is the amount received by the employee after retirement. Based on the type of payment, the pension can be divided into the following two parts-
1. Commuted pension – lump sum payment received, in lieu of the periodic pension; and
2. Uncommuted pension – periodic pension received (monthly, quarterly or annually).
The pension so received would be taxable under the head ‘Salary’. Further, in case the family pension is received (after the death of the employee) by the legal heir, the same would be taxable under the head ‘Income from other sources’.
It is important to note here that the uncommuted value of pension is fully taxable for all the types of employees under the Income Tax. However, exemption towards a commuted pension is available under section 10(10A) of the Income Tax Act.
Exemption available under section 10(10A) of the Income Tax Act–
The commuted pension received is exempted under section 10(10A) in the following manner-
1. The commuted value of pension received by the government employees (listed below) are fully exempted under section 10(10A)–
- Employees of the central government.
- Employees of state government.
- Employees of the local authority.
- Employees of a statutory corporation.
2. The commuted value of pension received by any other employees would be exempted in the following manner-
| Particulars | Amount of exemption |
| Cases, wherein, the employees receive any gratuity. | The commuted value of 1/3rd of the pension which the employee is normally entitled to receive. |
| In any other case. | The commuted value of 1/2 of the pension which the employee is normally entitled to receive. |
3. The commuted pension received from the pension funds [referred under section 10(23AAB)] set up by the Life Insurance Corporation or any other insurer are fully exempt.
Table – Articles on Section 10 Exemptions
Author Bio
I am a retired public sector bank pensioner. At the time of retirement, I got my 1/3 pension commuted. At present a fixed amount is being deducted from my monthly pension. My gross annual pension is about Rs. 796800/-, out of which Rs.105900/- is being deducted towards commutation recovery, leaving my net pension to Rs.690900/-. I shall be glad to know what shall be my taxable pension under the new tax regime for FY 2024-25 – RS.796800/- or 690900/-?
I would like to know taxability on death benefits of Unit Linked Pension Plan holder. I read section 10(10A) however it doesn’t say anything clearly if the nominee is liable to pay tax on the amount received after the death of pension policy holder.
If it would be taxable as per capital gain or inheritance tax, what would be the tax rate?
Are gratuity and commuted value of pension as fully exempt under sec 10(10) (I) and 10(10A) also available under new tax regime? is interest on deferred gratuity is taxable?
Dear Sir,
My husband received commuted pension of Rs.18.50 lakhs who retired from State Govt Service, as a teacher, please guide me regarding taxability of the said amount, whether the whole amount is non taxable or not.
Thanks and regards,
Dear Sir, i received commuted pension of Rs.15.50 lakhs after i retired from bank Service, in April 22please guide me regarding taxability of the said amount, whether the whole amount is non taxable or not.
Thanks and regards,
I am a retired bank employee retired in April 2022. I received gratuity, EL encashment and commuted value of pension commuted 40% of the pension. In my Form 16 rebate against gratuity is reflected as Rs.2000000/-, rebate against EL encashment is shown as Rs.300000/-, but rebate against commuted value of pension is shown as “0”(Zero). I received Rs.1500000/- as commuted value of pension after commuting 40% of my pension. I want to know whether I can show a tax rebate of Rs.500000/- (1/3 rd of the commuted value of pension received), against ‘Commuted value of pension” in my Income tax return for the AY 2023-24. Please send the reply at the earliest at my e-mail address given
श्री मान जी मैं शिक्षक के पद से मध्यप्रदेश शासन शिक्षा विभाग से सेवानिवृत्त हुआ हूं मुझे अपनी पेंशन कम्यूटेशन कराने पर लगभग1158732रूपया प्राप्त हुआ जो 2021मेमिला क्या उस पर मुझे आयकर देना होगा
यदि नहीं तो आयकर नियम की किस धारा से छूट प्राप्त होगी साथ ही यह भी बताया जावे रिटर्न फाइल में किस क़ पर उसे अंकित किया जावे
Sir, I took VRS in oct 2021 after 28 yrs of service & had received commutation of pension. My form 16 shows the full amount of commuted pension as exempted u/s 10(10A). So no tax is deducted on commuted pension. Still can I claim relief u/s 89 in form 10E. Please guide at the earliest.
Dear sir,
Amount received from Lifestage Pension Policy of ICICI (paid in 2009 to 2012) after maturity/surrender in 2021 is it taxable?
if pension is commuted, whether whole amount is is exempted ?
As per Section 80CCC, (ii)clause, any amount received from pension received from annuity plan is taxable,
Section 10(10A) (iii) clause says any commuted pension received from fund setup under section 10(23AAB) is exempt,
so can you please tell if entire amount receivable on maturity is taxable or exempt. Help is also required with the difference between commutation and surrender.
I retired as a bank employee in Dec,2018. As per XI bipartite my pension reduced due to D.A. rates decreased(from 0.10 to 0.07 per slab). So excess pension paid during the period from 1st Jan, 2019 to 31 st Mar,2021 amounting to Rs. 70000/-(approx) was recovered from the incremental commutation of pension amt. But it was not reflected in Form-26 by the bank for the F y.2020-21. So I have to pay inc.tax on the said amt. Is this right procedure? If not how can I adjust the recovery amt. with my pension income this year?
I was retired from lic .Now want to know that pl encashment is taxable or not .If taxable then what amount. Please reply
I retired as a banker in July 2020
Alongwith gratuity I received Rs. 9.20 lac as leave encashment and Rs. 11.74 lac as commuted value of pension. Pls guide as to how my above incomes for FY 2020-21 will be taxable and what portion of these can be exempt .
Also during the FY 2021-22 I am likely to receive estimated amount of arrears of commuted value of pension amounting to Rs. 7.00 lac as revised salary / pension. Pls guide also about tax applicability and exemption for the commuted value to be received in current FY .
Regards
Is the restored amount of the commuted pension after fifteen years taxable?
Is the monthly payment by govt. in respect of the commuted pension after fifteen years?
Dear Sir,
Your explanation regarding various exemptions under sec 10 of income tax are very helpful. I request you if you can please clarify/ guide me that a PSU insurance employee who got 1/3rd. of commuting value of pension say Rs.14 lakh. Is this whole commuting value of pension amounting to Rs.14 lakh is tax exempted under sec. 10 (10A).
Kindly advise at the earliest on priority.
Hope, you will not disappoint me.
Thanks and regards!