TAX EXEMPTION FOR SEVERANCE PACKAGE
QI had worked in a private company for the past 10 years. Some of the employees, including me, lost jobs on January 31, 2016. I got around `2.5 lakh as gratuity and around `8 lakh as a retrenchment package. Soon after, I got a job in another company. What are the tax implications of gratuity and retrenchment package? Please kindly help me.
The retrenchment compensation refers to any amount received by an employee for either termination or when he is continuously ill or going against the company rules, policies, and conduct. Such compensation is exempted under Section 25F(b) of the Industrial Disputes Act 1947, the least of the following is exempted.
1) Amount of compensation received from the company under the above reasons;
2) Fifteen days average salary for each completed years or part in excess of six months
3) `5 lakh
QMy mother is a government employee. Apart from the salary, she also receives family pension for my father’s services as a government teacher. He had passed away last year. Tax is deducted at source for both salary and pension. Please tell me if we have to add pension amount while filing income-tax returns for her? Without the pension, the form shows no tax due. But when I tried to add the pension to the form it showed an amount of more than `1 lakh due. Is this correct?
The income received as family pension is taxed under the head “income from other sources”. As per Section 57(iia) of the Income-Tax Act, a deduction of one-third of the family pension amount subject to a maximum of `15,000 is allowable. Therefore, she is advised to include the family pension amount claiming the deduction mentioned above and pay the balance amount of tax.
QI returned to India in 2012 after staying in the US for 19 years. During my stay in the US, I had invested in mutual funds out of my income earned in dollars. These investments in mutual funds were made in the US, which I am holding even now. What will be the tax implications if I sell these units now and repatriate this money into India? I have also taken an insurance policy in the US which is likely to mature shortly. What will be tax implications if the maturity proceeds are also repatriated? RAHUL K. Bengaluru
Your status as per Section 6 of Income-Tax Act will be that of a “resident and ordinarily resident” (R&OR) in India. Accordingly, your gain, if any, from the sale of units of mutual fund held in the US will be taxable in India. However, you will be eligible to take credit for any taxes paid in the US on such gain, for computing your tax payable in India. The credit that could be taken will be the lower of the tax payable on such income in the US or in India. With regard to the maturity proceeds of life insurance policy, normally it will be exempt under Section 10 (10D) of the I-T Act, subject to certain exceptions.