Individuals depend on their lifetime of investment and savings funds to lead a decent retirement life. While we are for the most part mindful of the advantages of retirement schemes, the income taxation of such salary is uncertain. Indeed, most of the retirement benefits are non-taxable and exempted from ITR (Income Tax Return) in India. Let us understand this in more detail below:
1. Leave Compensation: The encashment of unutilized leaves of a workers / employees at the retirement is paid. The whole leave compensation is tax exempted from income for a government representatives / employee. Be that as it may, for a non- government workers / employees get tax benefit up to Rs 3 Lakhs, subject to conditions.
2. Voluntary Retirement Scheme (VRS): Voluntary retirement scheme (VRS) is tax exempted upto the limit of Rs.5 Lakhs.
3. Pension Amount: Pension can paid as a single amount or uncommuted (got on a month to month or specified interval of period). Uncommuted benefits credited / received by all class of workers / employees are always taxable. Be that as it may, all fully paid pension benefits are tax exempted, subject to conditions. Benefits / pension received by spouse or family member, is always treated as salary and is taxable in the hand of receiver of that amount. In any case, spouse or family member can duty claim upto Rs.15,000 or 33% of the total benefits from pension, whichever is lesser.
4. Employee Provident Fund (EPF): Interest earned on EPF is always credited to EPF account. EPF is taxable under ITR, if withdrawal is made before five years of continuous contribution and service, By that means, EPF amount received at the time of retirement is tax exempted (as you have served and contributed to EPF account for more than 5 years). - I hope this answers your question Shewta Jain.
5. Gratuity Amount: Gratuity received (credited) by government workers / employees are totally tax-exempt. For non - government workers / employees, Gratuity up to Rs.10 Lakh is tax exempted beyond that everything is taxable under ITR (Income Tax Return) during financial year.