Taxability of uncommuted pension and commuted pension

1. Taxability of Uncommuted Pension or Monthly Pension:

(a) Pension is received periodically by the retired employee

(b) It may be received by Government or non-government employees

(c) Amount received shall be fully taxable under the head salaries

2. Taxability of Commuted Pension:

(a) Pension is received in lumpsum as per the terms of the employment on retirement or superannuation.

(b) Full Value of Commuted Pension = Amount received on commutation / percentage of commutation.

(c) Taxability:

Recipient Amount Taxable

Government employee ( Central/State/Local Fully exempted u/s 10(10A)(i)

Authority or Statutory Corporation)

Fully exempted u/s 10(10A)(i)

Non-Govt. employee who has also received Gratuity u/s 10(10A)(ii)

 Amount Received

 Less: 1/3 of Full Value of Commuted Pension

 Non-Govt. employee who has not received Gratuity u/s 10(10A)(iii)

Amount Received

 Less:1/2 of Full Value of Commuted Pension

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