A retiring employee of a private employer receives gratuity and commutes the pension. What fraction of the normal pension entitlement is used to calculate the commuted-pension deduction under…
Question and options
A retiring employee of a private employer receives gratuity and commutes the pension. What fraction of the normal pension entitlement is used to calculate the commuted-pension deduction under section 19 (Table item 8) of the Income-tax Act, 2025?
One-half
One-quarter
Three-quarters
One-third
Answer and explanation
Correct answer: D - One-third
Section 19 (Table item 8) of the Income-tax Act, 2025 allows the commuted value of one-third of the normal pension where the employee also receives gratuity. Where no gratuity is received, the deduction is the commuted value of one-half of the pension.
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