Superannuation Taxability on resignation but retaining the amount with previous fund till 60 years age

POSTED BY S Jalpota ON May 16, 2013 1:29 pm COMMENTS (3)

16.05.2013

Dear Manish and  all learned members of Forum,

I  have a query on taxation of the commutation amount of LIC Superannuation Scheme of my friend  Anil:

Anil worked in a Co. for about 4 years and was covered in employer Superannuation scheme with LIC. He resigned and joined some other co. which did not have Superannuation Scheme. Anil let his fund remain with previous employer LIC superannuation fund for more than 10 years. Every year interest was credited to Anil membership a/c. Anil is now retiring from the service from his current employer as he has attained the age of 60 years. As per previous employer scheme, supperannuation age was 58 years. Anil requested now to his previous employer by filling the prescibed proformas about his intension:

1. To commute the accumulated amount to the extent permitted as tax free by Income Tax deptt.

2. To start the annuity from 01.04.2013

The dealing officer in P&GS section of LIC informed as under:

1.The commuted amount will be fully taxable. It does not make any difference from tax point of view if  the amount was allowed to remain with the previous employer for more than 10 years or so or the request for commutation/start of annuity was made after  attaining the age of 60 years. Since Anil left the previous employer by “Resignation” and not on “Retirement” after attaining the age of 58 years, Anil can not get tax free commuted amount ( 1/3 rd  amount is approx Rs. 4 lacs ) as it is more than free tax free  limit of Rs. 2.50 lacs (for senior citizen).

2. LIC officer further says that annuity will be given from the date of leaving the previous employer as arrears and not from current date

I need the advice from dear Manish and all the knowledgable members :

1. Whether the views expressed by LIC officer are correct or not as per the current provisions of Income tax Act. If not pls. advise what documentry evidence is there to show him that his views are not based on correct interpretation of Income tax Laws.

2. Why can’t annuity be started from the current date when the application is being made now to LIC/previous employer.

I have gone thro’ your web site and some others as well, but this issue has not been raised anywhere and therefore submitted for the response of enlightened people like you.

Thanks

Suresh



3 replies on this article “Superannuation Taxability on resignation but retaining the amount with previous fund till 60 years age”

  1. Dear Suresh, the info provided to you by that LIC person is correct. Had your friend resigned after a defined age (which is not the case), the things could be different.

    Thanks

    Ashal

  2. S Jalpota says:

    Thanks dear A Jauhri.
    Age of Anil was around 50 years and no defined minimum age for eligibility to get superannuation except that if somebody retires at the age of 58 years from the same employer, he would be getting the tax benefit on the commuted amount. One can commute any time before this age if he leaves the co. but the commuted amount would not be tax free.
    Rgds.
    Suresh

  3. Dear S Jalpota, what was the age of this Mr. Anil at the time of resignation from prev. employer? As per the rules of employment with that prev. employer, was any age defined to be eligible for superannuation? Say 55Y was the defined age but he resigned @ 48Y.

    Please clarify.

    Thanks

    Ashal

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Download Our FREE Ebook!

Available only for first 100 people today

Download Our FREE Ebook!

Available only for first 100 people today