Superannuation taxfree or not


#1

Can anyone tell me if superannuation withdrawals tax free or not.


#2

On maturity you can withdraw only 1/3rd or 25% of the total proceeds in your fund while the remaining 2/3rd needs to be converted as regular pension.

Only the 25% you withdraw from your superannuation fund at retirement is tax free. The pension or annuity you receive for the remaining 75% will be treated as salary and added to your income and taxed as per your income tax bracket.


#3

Hi Ashok,

In order to provide superannuation for their employees, companies tie up with insurance firms. Superannuation programs are usually annuities that include pension. Most insurance firms allow you to commute/withdraw 1/3rd of the amount when you resign. In order to withdraw the rest of the amount, you need to speak to the insurance firm. Some might allow you to withdraw it in tranches in 5 years or 10 years while some others insist that you need to wait until you retire. So, while it’s not necessary to immediately withdraw your funds, you should speak to the insurance firm that provided the superannuation program for your firm and find out how you can withdraw the funds in the future.

The lumpsum withdrawn at the time of retirement is tax-free. However, the pension is taxable just like salary.

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BB Expert