Income Tax on Superannuation Fund
Planning for life after retirement is not something you can take lightly. Being financially independent and living your life without any stress is a big deal especially in a country like India where social security schemes from the government are scarce.
There are many employees (government or private) who simply do not bother to take a look at their Superannuation Fund. Some don't even know that such an account actually exists in their names. Being aware of the money in your superannuation account is useful for obvious reasons. For one, you will have a better idea about your savings and can plan your golden years accordingly.
Defining Approved Superannuation Amount:
If your savings in this fund is authorized by the Commissioner in compliance with the regulations laid out in the Indian Income Tax Act, 1961 (Part B - 4h Schedule), then it comes under the category of approved superannuation savings. In simple terms, it is that schedule of the Income Tax Act in your provident funds and other retirement funds are given authorization providing certain requirements are met. You must also be able to get information from the commission if it is permitted. You can also enquire the same from your employer or accounts department.
Method of Taxations:
You as an employee too can contribute to the superannuation amount. But did you know that it is eligible for income tax deduction as per the section 80-C? It is exempted from tax up to INR 1 lakh per year. Nevertheless, the contribution you make after this set amount will be taxed.
Perks of Superannuation Fund:
Superannuation amount is a one of the retirement perks provided to you by your company. Every year, your boss contribute a certain percentage of your monthly remuneration on your behalf in the group retirement policy held by the organization; an important step in amassing wealth for a comfortable life post age 60.
Here are certain facts and tips regarding this fund:
- Superannuation Fund is one of the numerous retirement perks given to you by your organization. They do this by partnering with agencies like Life Insurance Corporation.
- The firm gives 15 percent of the basic salary as their input towards the fund, which could be in different security schemes as per the savings pattern opted by the company and the employee need not make any.
- Interest assimilated on the balance in the fund will be credited to you. Usually the interest rate will be the same as that of the interest earned on provident fund.
- On reaching the sequestration age, you will be eligible to take 25 percent of amount remaining in your account exempted from being taxed.
- The remaining 75 percent will be deposited in another annuity account and the agency (LIC) will shell out the returns to you per month/ three months/ year as per your convenience. This sum credited on a regular basis will be taxed.
- If you decide to resign, you may opt to relocate your account to your new boss and if your new company doesn't offer a Superannuation Fund, then you shall pull out the entire funds (after tax deduction) upon getting the request approved from the IT department. You may also maintain the account as it is until the retirement age.
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