Taxability of Retirement Benifits under Income from Salary

Leave Encashment
No.	Section	Particulars	Taxability/Exemption
1	10(10AA)	Encashment of unutilized earned leave at the time of retirement of Government employees	Fully Exempt
2	10(10AA)	Encashment of unutilized earned leave at the time of retirement of other employees (not being a Government employee)	Least of the following shall be exempt from tax: a) Amount actually received b) Unutilized earned leave* X Average monthly salary c) 10 months Average Salary** d) Rs. 3,00,000 * While computing unutilized earned leave, earned leave entitlements cannot exceed 30 days for each completed year of service rendered to the current employer ** Average salary = Average Salary*** of last 10 months immediately preceding the retirement ***Salary = Basic Pay + DA (to the extent it forms part of retirement benefits)+ turnover based commission
Retrenchment Compensation
3	10(10B)	Retrenchment Compensation received by a workman under the Industrial Dispute Act, 1947 (Subject to certain conditions).	Least of the following shall be exempt from tax: a) Amount calculated as per section 25F(b)of the Industrial Disputes Act, 1947; b) Rs. 5,00,000; or c) Amount actually received Note: i. Relief under Section 89(1) is available ii. 15 days average pay for each completed year of continuous service or any part thereof in excess of 6 months is to be adopted under section 25F(b) of the Industrial Disputes Act,1947
Gratuity
4	10(10)(i)	Gratuity received by Government Employees (Other than employees of statutory corporations)	Fully Exempt
5	10(10)(ii)	Death -cum-Retirement Gratuity received by other employees who are covered under Gratuity Act, 1972 (other than Government employee) (Subject to certain conditions).	Least of following amount is exempt from tax: 1. (*15/26) X Last drawn salary** X completed year of service or part thereof in excess of 6 months. 2. Rs. 10,00,000 3. Gratuity actually received. *7 days in case of employee of seasonal establishment. ** Salary = Last drawn salary including DA but excluding any bonus, commission, HRA, overtime and any other allowance, benefits or perquisite
6	10(10)(iii)	Death -cum-Retirement Gratuity received by other employees who are not covered under Gratuity Act, 1972 (other than Government employee) (Subject to certain conditions).	Least of following amount is exempt from tax: 1. Half month’s Average Salary* X Completed years of service 2. Rs. 10,00,000 3. Gratuity actually received. *Average salary = Average Salary of last 10 months immediately preceding the month of retirement ** Salary = Basic Pay + DA (to the extent it forms part of retirement benefits)+ turnover based commission
Pension
7	-	Pension received from United Nation Organization by the employee of his family members	Fully Exempt
8	10(10A)(i)	Commuted Pension received by an employee of Central Government, State Government, Local Authority Employees and Statutory Corporation	Fully Exempt
9	10(10A)(ii)	Commuted Pension received by other employees who also receive gratuity	1/3 of full value of commuted pension will be exempt from tax
10	10(10A)(iii)	Commuted Pension received by other employees who do not receive any gratuity	1/2 of full value of commuted pension will be exempt from tax
11	10(19)	Family Pension received by the family members of Armed Forces	Fully Exempt
12	57(iia)	Family pension received by family members in any other case	33.33% of Family Pension subject to maximum of Rs. 15,000 shall be exempt from tax
Voluntary Retirement
13	10(10C)	Amount received on Voluntary Retirement or Voluntary Separation (Subject to certain conditions)	Least of the following is exempt from tax: 1) Actual amount received as per the guidelines i.e. least of the following a) 3 months salary for each completed year of services b) Salary at the time of retirement X No. of months of services left for retirement; or 2) Rs. 5,00,000
Provident Fund
14	-	Employee’s Provident Fund	For taxability of contribution made to various employee’s provident fund and interest arising thereon see Note 3.
National Pension System (NPS)
15	10(12A)	National Pension System	Any payment from the National Pension System Trust to an employee on closure of his account or on his opting out of the pension scheme referred to in section 80CCD, to the extent it does not exceed 40% of the total amount payable to him at the time of such closure or his opting out of the scheme.
Note: Partial withdrawal from NPS shall be exempt to the extent of 25% of amount of contributions made by the employee.