Business Mantra News
- In simple terms, pension is a means of helping and providing support to the employee who gets retired from active service after a certain age.
- Pension is a plan to provide financially aid to retired employees who have been worked since long for an organization/organizations.
- However, all employers don’t have scheme of pension, generally Govt./Public Sectors provides for pensions scheme for employees after retirement.
- Most pension benefits are subject to tax under the head salaries in your Income Tax Return (ITR).
- Pension can be paid periodically on monthly basis as well as there is an option for the retired person to get pension commuted also in which one may apply to get certain % of your pension in advance.
- Both periodical pensions are fully taxable while commuted pension is fully or partially taxable.
- A question of debate arises i.e. “Is it appreciable to imposed tax on pension?
- Congress leader Shashi Tharoor has suggested that pension up-to Rs.5 lakhs should be exempted from tax.
- According to the finance ministry sources this suggestion of Income Tax exemption upon pension would be examined during the Union Budget Session 2018.
- Government has a number of schemes for people above 60 in the form of additional interest.
- Railway and other modes of transport also charge discounted fare from senior citizens.
- Senior Citizens above 60 years of age have their main income from Pension and interest.
- Moreover inflationary trend has reduced interest regime during the course of time during 90s interest rates were 10+% whereas at present interest rates has come down to 6+%.
- Government also proposes to give certain exemptions in indirect taxes to retired/senior citizens.
But in our opinion, Pension should be completed exempted from any kind of tax whether it is direct or indirect for Commuted or Periodical Pension.