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CS Executive · Tax Laws and Practice · Income under the Head Salary

Mr. Iyer, a private company employee, receives commuted pension from his employer. He has also received gratuity from the same employer. Under the Income-tax Act, 2025, what portion of the pension is the deduction measured on?

The deduction is measured on the commuted value of one-third of the pension normally receivable, because he has received gratuity as well. If no gratuity had been received, one-half of the pension would be used. Full exemption is for Government-type schemes.

  1. AThe commuted value of one-third of the pension he is normally entitled to receiveCorrect
  2. BThe commuted value of one-half of the pension he is normally entitled to receive
  3. CThe entire commuted amount
  4. DThe commuted value of one-fourth of the pension he is normally entitled to receive

Explanation

Serial No. 8 provides that for commutation under a scheme of any other employer, where the employee has also received gratuity, the deduction is based on the commuted value of one-third of the pension normally receivable. One-half applies only where no gratuity is received. The entire amount is for Government-type schemes.

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