Section 10(13): Income Tax Exemption for Payments from an Approved Superannuation Fund

Section 10(13) of the Income-tax Act, 1961 provided an exemption for specified payments from an approved superannuation fund. The exemption depends on why the payment is made and the statutory conditions; not every withdrawal from a retirement fund is automatically tax-free.

Meaning of Section 10(13)

An approved superannuation fund is a fund approved by the prescribed income-tax authority in accordance with the applicable rules and Part B of the Fourth Schedule to the Income-tax Act, 1961. Such funds are generally established to provide retirement benefits to employees and, in specified circumstances, their dependants or beneficiaries.

Section 10(13) addresses payments from an approved fund on certain specified events. It should be distinguished from Section 10(10A), which deals with certain commuted pensions, and from provisions concerning provident funds and the National Pension System.

Which payments are exempt?

1. Death of the beneficiary: Payment from the approved fund on the death of a beneficiary.
2. Retirement or incapacity: Payment in lieu of, or in commutation of, an annuity on retirement at or after the specified age, or on the beneficiary becoming incapacitated before such retirement.
3. Refund on death: Payment by way of refund of contributions on the death of the beneficiary.
4. Refund on leaving service: Refund of contributions on leaving service, but only to the extent the payment does not exceed contributions made before 1 April 1962 and interest on those contributions.
5. Transfer to the National Pension System: Payment by way of transfer to an account referred to in Section 80CCD and notified by the Central Government, where the applicable statutory conditions are met.

How much is exempt?

Where the payment falls within one of the qualifying categories, the amount covered by that category is exempt. There is no single universal monetary ceiling for all payments under Section 10(13). The leaving-service refund category is specifically limited to the historic contributions and related interest described above. Other payments or non-qualifying withdrawals must be examined under the relevant tax provisions.

Important conditions and distinctions

• The fund must have the requisite approved status; payments from an unapproved fund are not automatically covered.
• The event triggering the payment must fall within the statutory categories, and supporting fund documents should identify the nature of the receipt.
• A regular annuity or pension received periodically may have a different tax treatment from an eligible lump-sum commutation; do not treat every pension instalment as exempt under this clause.
• Employer contributions and accretions may attract separate rules, including perquisite taxation or other applicable provisions. The tax treatment of contributions is not determined solely by the exemption for qualifying fund payments.
• For an NPS transfer, verify that the destination account and transfer satisfy the law and applicable notification.

Example

An employee retires at the age specified under an approved superannuation fund and receives an eligible amount in commutation of an annuity. That qualifying payment may be exempt under Section 10(13). If the employee instead receives periodic pension payments, those instalments require a separate tax assessment; they do not automatically receive the same exemption.

Documents to retain

• Fund approval details and scheme or trust rules.
• Retirement, incapacity, death or service-termination records, as applicable.
• Payment statement showing whether the amount is a commuted annuity, death benefit or contribution refund.
• Details of any pre-1 April 1962 contributions and interest where the leaving-service refund provision is relied upon.
• Transfer confirmation and account particulars where an NPS transfer is claimed.

Tax law applicable from 1 April 2026

Section 10(13) is a citation from the Income-tax Act, 1961. The Income-tax Act, 2025 came into effect on 1 April 2026. For a tax year governed by the newer Act, check the corresponding exemption and its operative definitions, schedules, notifications and transitional provisions. Historical tax years remain subject to the law applicable to those years.

Official sources and further reading

• Income Tax Department: statutes, rules and guidance
• India Code: Income-tax legislation and amendments
• Income Tax e-Filing Portal
• Gazette of India: official notifications

Frequently asked questions

Is every superannuation fund withdrawal tax-free?

No. The fund must be approved and the payment must fall within the qualifying categories. Other withdrawals may be taxable.

Is a monthly pension exempt under Section 10(13)?

Not merely because it comes from a superannuation arrangement. Periodic pension payments must be assessed under the applicable pension and salary provisions.

Can a qualifying fund balance be transferred to NPS?

The law provides a specific exemption for qualifying transfers to a notified NPS account, subject to the applicable conditions. Obtain written confirmation from the fund administrator.

Updated 10 October 2026. General information only; verify the applicable statute, fund approval and payment documentation before claiming exemption.