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The employer contributes a certain fixed percentage of the salary of each member. Such contributions are accumulated by LIC, and the accumulated amount is utilized to provide various benefits as mentioned below.
BENEFITS:
1. ON RETIREMENT:
On retirement of a member, the corpus (contributions plus interest) is utilized to provide the pension as per their choice.
2. ON DEATH:
The pension is payable for the life of the beneficiary. The corpus is utilized towards the payment of pension of the type the beneficiary may opt for, and the benefit received is tax-free. Additionally, a lump sum is payable by way of death, besides the pension, if the employer has taken a Group Insurance Scheme in conjunction with the Group Superannuation Scheme.
3. ON WITHDRAWAL:
He can choose to get the equitable interest transferred to the Superannuation Scheme of the new employer or opt for immediate or deferred pension.
PENSION OPTIONS PROVIDED BY LIC:
1. Life Pension ceasing at death.
2. Life Pension with Return of Capital and Group Pension Terminal Bonus on death.
3. Life Pension guaranteed for 5, 10, 15, or 20 years and life thereafter.
4. Joint Life Pension payable on the last survivor of the employee and spouse.
5. Joint Life Pension payable to the last survivor of the employee and spouse with return of capital on the death of the last survivor. If desired, 1/3rd of the pension can be commuted at vesting.
ELIGIBILITY CONDITION:
It is not obligatory or statutory for the employer to provide a pension to all employees. It is entirely up to the employer to decide to which class/classes of employees they wish to extend the scheme. The eligibility conditions may be defined based on designation or salary. However, once the categories are specified, the employer cannot discriminate between employees and must extend the scheme uniformly.
CONTRIBUTION:
The maximum annual contribution that an employer can make to the Pension Fund and Provident Fund is restricted by the Income Tax Provisions to 27% of the annual salary (basic plus D.A.). The annual contributions are treated as deductible business expenses.
WHO PAYS CONTRIBUTION?
Mostly the employer contributes, but if desired, both the employer and employees may contribute, in which case the scheme is called a Contributory Pension Fund Scheme.
TAX BENEFITS:
The provisions relating to the approved Superannuation Scheme are set out in Part 'B' of the Fourth Scheme of the Income-Tax Act, 1961, and Part XIII of the Income Tax Rules, 1962. The income tax concession will be available only if the scheme is approved by the CIT.
1. The annual contribution is treated as a deductible business expense in terms of Section 36(1)(iv) of the I.T. Act.
2. In terms of a Notification issued by the Central Board of Direct Taxes, 80% of the contributions towards past service liability are treated as deductible business expenses spread over the subsequent years of payment.
3. The employee's contribution, in the case of the Contributions scheme, qualifies for exemption under Section 80C of the Income-Tax Act.
GROUP INSURANCE SCHEME IN CONJUNCTION WITH SUPERANNUATION SCHEME:
The members of the Group Superannuation scheme can be covered under Group Insurance in conjunction with the superannuation scheme to provide death risk cover while in service, subject to certain conditions.
Gunjan
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