I’ve taken voluntary retirement after 16 years of service. My firm has paid me an quantity of 12 lakhs as compensation and seven lakhs for depart encashed, pf and gratuity. What are the tax implications and the way can I save tax on it?
Any cash obtained underneath voluntary retirement scheme drawn up in accordance with prescribed guidelines is exempt upto a most restrict of Rs. 5 lakhs underneath Part 10(10C). So out of Rs. 12 lakhs obtained by you Rs. 7 lakhs shall be taxable in your fingers in case it’s framed as per the foundations.
There’s an exemption of Rs. 3 lakhs for depart encashment topic nevertheless to a most of depart equal to 10 months. Please notice that this exemption is accessible in respect of depart encashment obtained by an individual from a number of employers throughout his whole lifetime. So in case you have got already availed any exemption for depart encashment up to now, the eligible quantity of depart encashment for exemption will come all the way down to that extent. Likewise there’s an exemption of upto Rs. 20 lakhs for gratuity obtained from a number of employer by an individual. Since you haven’t offered the person break-up, it’s not doable for me to point the person exemption obtainable to you. The quantity of Provident Fund stability is absolutely tax free in your fingers.
So far as choices to avoid wasting tax are involved, you have got restricted choices. In case you haven’t absolutely using the deduction underneath Part 80 C upto the utmost of Rs. 1.50 lakh you’ll be able to make investments upto Rs. 1.50 lakh both in senior citizen saving scheme or you’ll be able to put the cash in tax saving financial institution FD to the extent the identical is just not utilized. You may also declare tax advantages underneath Part 80 D in respect of medical insurance coverage premium upto Rs. 25,000/- for your loved ones in case you wouldn’t have any medical health insurance coverage. You may also avail further deduction upto Rs. 50,000/- for medical health insurance of your dad and mom if they’ve accomplished 60 years of age. You may also declare an unique deduction of Rs. 50,000/- in respect of contribution to NPS account underneath Part 80 CCD(1B).
Balwant Jain is a tax and funding knowledgeable and may be reached on jainbalwant@gmail.com and @jainbalwant on Twitter
Supply: Live Mint