Central government employees approaching retirement should be well-informed about the array of benefits awaiting them post-retirement. These encompass financial provisions, healthcare assistance, and diverse perks designed to ensure a seamless transition into a secure and comfortable phase of life after employment cessation.
Outlined below are the various benefits that central government employees can anticipate upon retirement:
To qualify for a pension, central government employees must have completed a minimum of 10 years in service. Upon fulfilling the pension criteria, they become eligible to receive pension payments. In case of the employee's demise, if the family has applied for a family pension, the spouse is entitled to receive the pension, subject to the completion of at least one year of continuous service or earlier if certified fit for service by a medical authority.
Presently, the minimum monthly pension limit stands at Rs. 9,000, while the maximum reaches up to 50% of the highest pay scale in central government positions, currently capped at Rs. 1.25 lakh per month. Pension payments continue until the pensioner's demise.
Additionally, central government employees can withdraw up to 40% of their National Pension System (NPS) corpus as a lump sum at retirement, while the remaining portion is invested in annuity schemes.
After retirement, central government pensioners are eligible for healthcare benefits under the Central Government Health Scheme (CGHS). These facilities are available across multiple cities, requiring pensioners and family members to register at a CGHS dispensary by submitting a prescribed application for a CGHS identity card.
For taxpayers, the exemption limit from AY2021-22 is Rs. 2.5 lakh. Retirees aged 60 and above enjoy a higher exemption limit of Rs. 3 lakh, while super senior citizens aged 80 and above have a limit of Rs. 5 lakh. Any pension exceeding these limits falls under taxable income.
Furthermore, retired individuals aged 60 and above can claim a standard deduction of up to Rs. 50,000 under section 16 of the Income Tax Act for their pension income.
Payments received from specified pension schemes are tax-exempt. However, family pensions are taxable, with a deduction of 33.33% or Rs. 15,000, whichever is lower.
Payments received under the Payment of Gratuity Act, 1972, are exempt from tax up to specified limits. Additionally, any other gratuity received upon retirement, termination of employment, or by the deceased employee's family is also exempt to the extent provided in Section 10(10) of the Income Tax Act.
Central or state government employees receive tax exemption on the cash equivalent of earned leave at retirement or superannuation. Other employees can enjoy this exemption for earned leave not exceeding 10 months, based on the average salary received during the 10 months immediately before retirement.
The following conditions determine tax exemptions related to the Provident Fund:
Starting AY2020-21, retirees aged 60 and above can claim a maximum deduction of Rs. 50,000 under section 80D for health insurance premiums. This deduction limit also applies to medical expenses incurred for senior citizens by family members, provided no amount is paid for their health insurance. Payments must be made through non-cash modes to claim this deduction.
Understanding these specific facets regarding gratuity, leave encashment, provident fund, and health insurance benefits is essential for retiring central government employees to maximize their post-retirement financial advantages.