Does the interest on retirement benefits such as gratuity, provident fund and leave salary fall under the purview of income tax, particularly when the beneficiary is 60 years of age? If yes, how is the tax calculated?

D. Ghosh, Calcutta

A person below 65 years is not considered a senior citizen for income tax purposes. The extent of tax exemption available to you on your retirement benefits will depend on whether you are a government or non-government employee. The income from such instruments is fully tax-exempt for government employees. But for non-government employees, there are limits. For example, a gratuity benefit of up to Rs 3.5 lakh or half a month’s salary for each completed year of service, whichever is less, is tax exempt for a non-government employee. The entire gratuity income and leave salary is totally tax exempt for government employees. For non-government employees, it is the least of the following: 10 months' average salary or Rs 2,40,000. Provident fund and superannuation fund benefits are, however, fully tax exempt.

No escape

According to the Income Tax Act, for escaped income of more than Rs 1 lakh, the time limit for issue of notice is six years from the end of the relevant assessment year. Please clarify whether this ‘six years’ means the subsequent assessment years or financial years?

N.K. Dubey, Calcutta

If an assessing officer believes that the income of an assessee of any previous year has escaped assessment, he can reopen the assessment and complete it when new information is received. Assessment up to last six years can be reopened. The ‘last six years’ refers to assessment years.

State your income

I want to close my NSS account by withdrawing the entire balance. In which column of the Income Tax Return form should I report this withdrawn amount? I use Form ITR 1.

Asit Bagchi, Calcutta

You can show your interest income from the NSS account in item 2(b) of the ITR 1 form.

If you have any queries about investing or taxes or a high-cost purchase you are planning, mail to: btgraph@abpmail.com, or write to: Business Telegraph, 6 Prafulla Sarkar Street, Calcutta 700 001.