Many a times, you would have noticed a component in our salary – Superannuation. This is the part of salary component that is not very well understood.
- The contributed amount is tax free in the hand of employer (under Section 36(1) (iv) of the I.T. Act) and employee.
- The amount accumulated in this head and gain on this amount is part of retirement pay-off and pension.
- The Fund collected in Superannuation Scheme is invested in various investment instruments such as Equity, Debt etc. as per the scheme. The net gains from these investments are credited to the employees (who contributed).
- Superannuation is optional for employer and employer may opt for this scheme for a cadre (designation/years of experience) of employees.
- If an employee resigns in an organization and join another then
- he can get the amount transferred to Superannuation Scheme of next employer
- If new employer does not have Superannuation Scheme then
- He can withdraw Superannuation amount after paying taxes on the amount Or
- He can retain the amount in previous employers Superannuation Scheme until retirement age
- The employees under the scheme may be covered under Group Insurance so as to provide death risk cover while in service.
- Upon retirement, 25% of the accumulated Superannuation Fund is paid to employee and rest 75% is used to pay off pension.
- The pension amount that the employee receives is taxable
- The pension can be paid monthly, quarterly, half yearly or yearly depending upon the terms of the scheme with Employer.
- Employer may contribute 15% of Basic + DA (DA is mostly given to Government Employees) for an employee. An employee may not change the amount going in this scheme.
- An employee may not withdraw any amount from Superannuation until retirement except when changing employment and the new employee does not have Superannuation Scheme.
- If employer chooses for contribution for a cadre then all employees in that cadre will enroll. It is not possible to enroll a few in a cadre.