Commuted pension is exempt from tax

 









We have presumed that this property is located in India. As per instructions issued for filing Form ITR-3 for FY 2020-21, the details of each property owned or co-owned by you during the year is required to be reported in Schedule HP under the head ‘house property’.

Where the property is co-owned, your ownership percentage and the name, PAN and respective ownership percentage of all other co-owners are required to be reported. The total of the ownership percentages of all co-owners (including yours) should be 100%. Accordingly, in relation to the error faced by you, kindly ensure you fill the Schedule HP with all the above mentioned details and ensure that the total of all ownership percentage equals 100%.

We assume from the facts provided that the life stage pension policy held by you with ICICI Prudential Insurance Company is in the nature of a private pension policy and not a life insurance policy. We have assumed that the fund set up by ICICI Prudential Insurance Company is under a pension scheme approved by the Insurance Regulatory and Development Authority of India (Irdai) for the purpose of receiving pension.

As per the provisions of the income tax law, any payment received in commutation of pension received from an approved fund (not under a scheme of the employer) is fully exempt from tax.

Accordingly, if you propose to commute the entire fund value in cash now, the entire sum received by you should be exempt from tax in your hands. However, this is subject to permissibility of such higher commutation under the policy terms.


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