JANUARY 29, 2018

By Prarthana Jalan, CA

IT is suggested that the employer contributions to an approved superannuation fund may be made fully exempt from tax. This will also encourage one of the key focus areas of the Government of creating a pension based society.

Section 17(2)(vii) of the Act, as amended by the Finance Act, 2016, provides that any contribution to an approved superannuation fund by the employer, to the extent it exceeds one lakh and fifty thousand rupees, will be taxable as a perquisite in the hands of the employee. 

Contributions to superannuation fund may or may not result in superannuation benefits to the employees, since there are various conditions to be fulfilled by the employees like serving a stipulated number of years, reaching a certain age

etc. Further, the pension payments are subject to tax at the time of actual receipt by the employee after his retirement. 

This may lead to partial double taxation for the employee where the contributions had been taxed earlier also (when the contributions exceeded INR one lakh and fifty thousand rupees).