Exemption for payment from approved superannuation fund Section 10(13)

Provisions of section 10(13) of the Income Tax Act exempts payment received from an approved superannuation fund. The present article briefly explains the term ‘approved superannuation fund’ and covers exemption available under provisions of section 10(13).

Basic understanding of the term ‘approved superannuation fund’ and tax benefits thereon-

In simple terms, superannuation is an organizational pension program designed by the company for the benefit of its employees. The superannuation fund approved by the Commissioner of Income Tax is known as ‘approved superannuation fund’. Income tax benefits available to an approved superannuation fund is briefed hereunder-

• Deduction under section 80C is available against the employee’s contribution to the approved superannuation fund.
• Interest received on the superannuation fund is exempt from tax.
• Employer’s contribution to the approved superannuation fund is exempt to the extent of INR 1.50 Lakhs per year per employee. If the amount exceeds INR 1.50 Lakhs, the excess amount would be taxable in the hands of the employee.
• The amount received from an approved superannuation fund is exempted as per provisions of section 10(13).

Exemption available under section 10(13) of the Income Tax Act–

Any payment from an approved superannuation fund, made under following circumstances, shall be exempt-

1. The payment has been made on the death of the beneficiary; or

2. The payment has been made, by way of refund of the contributions, on the death of the beneficiary; or

3. The payment has been made, by way of transfer, to the account of the employee under the pension scheme referred under section 80CCD and notified by the Central Government; or

4. The payment has been made to an employee in lieu of / in commutation of an annuity either on his retirement, at or after a specified age or on him becoming incapable prior to his retirement; or

5. The payment has been made, by way of refund of contribution, to an employee on leaving the service (in connection with which the fund is established) at or after a specified age or on the employee becoming incapable prior to his retirement.

Extract of Section 10(13)

10. Incomes not included in total income.

(13) any payment from an approved superannuation fund made—

(i) on the death of a beneficiary; or

(ii) to an employee in lieu of or in commutation of an annuity on his retirement at or after a specified age or on his becoming incapa-citated prior to such retirement; or

(iii) by way of refund of contributions on the death of a beneficiary ; or

(iv) by way of refund of contributions to an employee on his 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, to the extent to which such payment does not exceed the contributions made prior to the commencement of this Act and any interest thereon; or

(v) by way of transfer to the account of the employee under a pension scheme referred to in section 80CCD and notified by the Central Government;

Table – Articles on Section 10 Exemptions