Mr. Vikash is getting a pension Rs. 4,000 per month from a company. During the previous year, he got two-third pension commuted and received Rs. 1,86,000. Compute the exempted amount, if (a) he also received gratuity (b) he did not received gratuity, for the assessment year 2022-23

To calculate the exempted amount for the commuted pension received by Mr. Vikash, we need to consider the rules related to the exemption of commuted pension and gratuity under the Income Tax Act in India.

(a) If Mr. Vikash also received gratuity:

  1. Commuted Pension:
  • Mr. Vikash received Rs. 1,86,000 as the commuted pension.
  1. Gratuity:
  • If Mr. Vikash received gratuity, the exempted amount of gratuity is calculated using the formula: Gratuity Exemption = Least of the following:
    • Actual Gratuity Received
    • Rs. 20,00,000 (maximum limit as per the Income Tax Act)
    • Gratuity calculated as per the formula: (15/26 * Last Drawn Salary * Completed Years of Service)
  1. Exemption Calculation:
  • The exempted amount for commuted pension is calculated as follows:
    • Exempted Amount = (1/3 * Commuted Pension)
  1. Total Exempted Amount:
  • Total Exempted Amount = Exempted Amount for Commuted Pension + Exempted Amount for Gratuity

(b) If Mr. Vikash did not receive gratuity:

In this case, we only need to calculate the exempted amount for the commuted pension.

Exemption Calculation:

  • Exempted Amount = (1/3 * Commuted Pension)

Now, let’s plug in the values and calculate:

(a) If Mr. Vikash also received gratuity:

  1. Exempted Amount for Commuted Pension = (1/3 * 1,86,000)
  2. Exempted Amount for Gratuity (calculated using the relevant formula)
  3. Total Exempted Amount = Exempted Amount for Commuted Pension + Exempted Amount for Gratuity

(b) If Mr. Vikash did not receive gratuity:

  1. Exempted Amount for Commuted Pension = (1/3 * 1,86,000)

Please note that the calculation of gratuity exemption involves the Last Drawn Salary and Completed Years of Service, which would be specific to Mr. Vikash’s employment details. It is recommended to use the actual details to compute the gratuity exemption accurately. If needed, consulting with a tax professional for personalized advice is advisable.

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