Query 1]

Sir, I am a teacher and my Gross Income in a year is Rs. 2,80,500/- (from 1st April 2010  to 31st  March 20 11).  My deduction from salary is only Rs. 9,360/-, total in a year, under Provident Fund A/c.  But, I pay Rs. 15,665/- yearly as LIC premium against a policy which is in the name of my husband.  In my Income Tax declaration, I have shown the details as under: –

  1. a) Public Provident Fund Rs. 9,360/- (b) National Saving Certificate (NSC) Rs. 50,000/- and (c) LIC Premium Rs. 15,665/-.

My employer has told me that you can not show LIC Premium as saving since it is in your husband’s name and you will not get any exemption. May I request you to clarify me what is the Rule? [Mrs Keya]


You are eligible for deduction u/s 80C towards the life insurance premium paid by you on the life insurance policy of your husband. . If the school refuses or doesn’t consider the deduction while working out Tax Deduction at Source from your salary income, you can claim the same u/s 80C while filing your income tax return.


Query 2]

  1. I have changed my job from one company to other company. On settling my account with old company, I am suppose to get Rs. 8 Lacs as Gratuity and Rs. 17 Lacs as PF accumulation. Please tell us this amount will be taxable? []
  2. Sir, I will be retiring in the Month of April-2011. I want to know the amount of gratuity exempt from income tax. Whether it is Rs. 3.50 Lacs or Rs. 10 Lacs? Please guide as I am conflicting opinions. [Anand L.]


  2. In the Case of Government Employee [Section 10(10)(i)]:Any death cum retirement gratuity received by an employee of the Central/State Government or Local Authority, is wholly exempt from tax.
  3. In the Case of Employee covered by the Payment of Gratuity Act [Section 10(10)(ii)]:
    Any gratuity received by an employee covered by the Payment of Gratuity Act, 1972, is exempt from tax to the extent of
    (i) 15 days salary (7 days in the case of employees of seasonal establishments) based on the salary last drawn for every completed year of service or part thereof in excess of 6 months;
    (ii) Rs. 10 Lacs [Previously it was Rs. 3,50,000] or
    (iii) gratuity actually received,
    whichever is less. Gratuity in excess of the aforesaid limits is taxable in the hands of the assessee.
  4. In the case of any other Employee [Section 10(10)(iii)]:
    Any other gratuity [not covered by a & b above], received by an employee on retirement, death, termination, resignation or on his becoming incapacitated prior to retirement, is exempt from tax to the extent of the least of
    (i) Rs. 10 Lacs for employees retirement/ death etc on or after 24.05.2010 (Prior to 24.05.2010, the maximum amount eligible for deduction u/s 10(10)(iii) was Rs. 3.50 Lacs);
    (ii) half month salary for each completed year of service; or
    (iii) gratuity actually received.
    Gratuity in excess of the aforesaid limits is taxable in the hands of the employee on due or receipts basis.
  6. It is presumed that you were member of a Recognized Provident Fund plan.
  7. In case of withdrawal from the accumulated PF, the following rules apply:

– If you have maintained the PF account for more than 5 years, there is absolutely no tax on the PF amount withdrawal.

– If you have maintained the PF account for less than 5 years, the amount of withdrawal is included in your income for that year, and is taxed as per the prevailing income tax slabs / brackets.


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