UPS Pension Scheme
After retirement, the employees and their families had many questions about the Unified Pension Scheme (UPS) launched to provide financial security to the employee. Especially on tax on pension, withdrawal and family pension. The answers to these questions recently shared the information by the Department of Financial Services (DFS), about which we are telling you in detail here.
Family pension will be taxable
DFS has made it clear that if an employee dies and his spouse gets a family pension, then this income will be taxable under income from other sources. That is, this amount received by the spouse will come completely under the tax realm.
Nutrition on retirement
UPS subscribers can withdraw up to 60% of your corpus amount at the time of suiting or retirement. There is also an option for partial withdrawal during service. According to DFS, up to 25% of its contribution will be partial withdrawal tax free. (Under IT Act, Section 10 (128)) Tax rules will be applicable separately on the remaining withdrawal.
Monthly pension will be taxed
After retirement, the monthly pension subscriber will be considered salary income. DFS said that this pension will have to pay tax like general income tax. According to DFS, at the time of retirement or suiting, the subscriber can remove up to 60% of the corpus (or 60% of the benchmark corpus, whichever is less). This amount will be completely tax free. (Under Section 10 (12A)).
Understand tax calculation by example
- DFS has explained tax treatment with an example.
- Monthly salary: 3 lakh rupees
- Service period: 25 years
- Individual Corpus: Rs 2 crore
- Benchmark Corpus: Rs 1.80 crore
- 60% withdrawal (Rs 1.08 crore) tax free
- Out of additional corpus 20 lakh rupees, 60% i.e. 12 lakh rupees tax free, remaining 8 lakh rupees taxable
- 40% remaining corpus (Rs 72 lakh) will be transferred to the pool corpus which will not be taxed