Section 10(13)

Section 10(13) — the law in short

What the courts have decided on section 10(13), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• S.D.S. Mongia v Central Board of Direct Taxes — a receipt excluded by s.10(13) does not become taxable because the assessee offered it, and Article 226 can correct that even where the s.264 revision is time-barred High CourtHelps taxpayerValidity unconfirmed
  My client offered a superannuation fund receipt to tax for several years before realising it was exempt. His section 264 revision has been rejected as time-barred and the assessment years are closed. Is there anything left?
  The Delhi High Court gave relief on exactly those facts. It upheld the Commissioner's rejection of the section 264 revision as barred by limitation, but held that the constraints felt by the Commissioner under section 264 do not impinge on the Court's powers under Article 226; that Article 265 mandates that no person shall be taxed without the authority of law; and that since there was no authority to tax the annuities the petitioner had received, it was appropriate to exercise the extraordinary jurisdiction to correct the injustice even though the injustice was of the assessee's own making.
• Statutory position — s.17(3): what "profits in lieu of salary" includes, the exemption receipts it carves out, and the limb that catches money paid before employment begins or after it ends CBDT Circulars & InstructionsCuts both ways
  My client received a payment from a former employer that is not gratuity, not retrenchment compensation and not under any VRS. The Assessing Officer says it is profits in lieu of salary. What exactly does s.17(3) cover, and what does it not?
  Section 17(3) has three limbs. Clause (i) covers the amount of any compensation due to or received from an employer or former employer at or in connection with the termination of employment or the modification of its terms and conditions. Clause (ii) covers any payment due to or received from an employer, a former employer or a provident or other fund, but expressly excludes any payment referred to in clause (10), (10A), (10B), (11), (12), (13) or (13A) of section 10, and excludes so much of the payment as consists of the employee's own contributions or interest on them or any sum received under a Keyman insurance policy including bonus allocated on it. Clause (iii) covers any amount due to or received, whether in lump sum or otherwise, by any assessee from any person before his joining any employment with that person or after cessation of his employment with that person.
• Statutory position — s.10(13) on the approved superannuation fund, and s.17(2)(vii)/(viia): the Rs. 7,50,000 AGGREGATE ceiling on the employer's contribution to provident fund, NPS and superannuation taken together, and the annual accretion on it CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  My client's Form 16 now shows a perquisite for the employer's contribution to the superannuation fund and to NPS. Is there a separate limit for each fund, and what is the extra line for annual accretion?
  There is one limit, not three. Section 17(2)(vii) makes the amount or the aggregate of amounts of any contribution made to the assessee's account by the employer in a recognised provident fund, in the scheme referred to in s.80CCD(1) and in an approved superannuation fund a perquisite to the extent it exceeds seven lakh and fifty thousand rupees in a previous year — a single aggregate figure across all three. Section 17(2)(viia) then makes the annual accretion by way of interest, dividend or any other amount of similar nature during the previous year to the balance at the credit of those funds a further perquisite, to the extent it relates to the contribution already taxed under sub-clause (vii), computed in the manner prescribed. Separately, s.10(13) exempts payments out of an approved superannuation fund on the death of a beneficiary, to an employee in lieu of or in commutation of an annuity on retirement at or after a specified age or on incapacity, by way of refund of contributions on death, by way of refund of contributions on leaving service otherwise than by such retirement or incapacity to the extent the payment does not exceed the contributions made before the commencement of the Act and interest on them, and by way of transfer to the employee's account under a pension scheme referred to in s.80CCD and notified by the Central Government. Both sub-clauses date from 1 April 2021: section 13 of the Finance Act, 2020 substituted sub-clause (vii) and inserted sub-clause (viia) with effect from that date, so the aggregate ceiling first applies for assessment year 2021-22. Before that, sub-clause (vii) reached only the employer's contribution to an approved superannuation fund and only above one lakh and fifty thousand rupees, and there was no sub-clause (viia) at all.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.