Most employees know about PF, gratuity, and NPS — but superannuation often stays hidden inside salary structures, mentioned in a single line of the CTC. You may not even notice it until HR explains it during exit or retirement.
Superannuation is essentially a retirement benefit funded by your employer, & its tax treatment is governed by multiple sections of the Income Tax Act. The main sections that govern the tax treatment of an approved superannuation fund in India are Section 10(13), Section 36(1)(iv), Section 80C, and Section 17(2). The rules for approval are detailed in Part B of the Fourth Schedule of the Act.
What Exactly Is Superannuation?
Superannuation is a retirement benefit that your employer contributes to on your behalf.
Think of it as a long-term financial gift your company builds for you quietly, year after year.
The money goes into an approved superannuation fund, managed by insurers or trustees, grows over the years, and becomes a corpus you can access when you retire.
What makes it special?
- You don’t feel the contribution — there’s no deduction in your take-home.
- It grows steadily with interest.
- And most importantly: parts of it are tax-free.
But the tax treatment depends on the sections we’ll understand below.
Section 10(13): The Tax Exemption Section
Section 10(13) is the heart of the tax benefits on superannuation. It states that the following payments from an approved superannuation fund are fully exempt:
- On death of the employee
- On retirement, provided it is in commutation (lump sum) form
- On becoming incapacitated
- When the fund is transferred to another approved fund
- If the employee chooses annuity options as per scheme rules
I’ve seen employees breathe a sigh of relief when they learn this. Retirement money without tax deductions feels like a blessing.
Also Read: Section 10(13A) of Income Tax Act: HRA Exemption
Section 36(1)(iv): The Employer’s Deduction
Most employees never read this part, but it affects company policy.
Under Section 36(1)(iv), the employer’s contribution to an approved superannuation fund is allowed as a deduction for the company — provided it stays within limits & complies with the Fourth Schedule.
This is why many employers willingly invest in superannuation instead of giving fully taxable salary."
Both sides win.
Section 17(2): When Superannuation Becomes a Perquisite
This section explains taxation from the employee’s point of view.
Employer contribution up to ₹1,50,000 per year is tax-free.
If the employer contributes more than this, the excess becomes a taxable perquisite.
It shows up in your Form 16 as part of your income.
This limit is important because high-salaried employees often get larger contributions, and the tax can surprise them if they aren’t informed.
Section 80C: The Employee’s Contribution
If you choose to contribute to the superannuation fund (not compulsory), your contribution qualifies for deduction under Section 80C — clubbed with PF, life insurance, ELSS, principal repayment, etc.
The limit, of course, stays the same:
₹1,50,000 per year under Section 80C.
Not many employees opt to contribute, but it can be a smart retirement move.
The Fourth Schedule, Part B: The Rulebook of Superannuation Funds
Part B of the Fourth Schedule outlines:
- What counts as an “approved” fund
- How trustees must operate
- Rules for contributions
- Investment methods
- Withdrawal policies
This approval matters because only approved funds get tax benefits under Section 10(13).
Also Read: Sukanya Samriddhi Yojana: Triple Tax Benefit Under Section 80C
How Superannuation Works in Real Life
Let’s say you work in a company that contributes ₹50,000 a year to your superannuation fund.
This continues for 25 years.
You don’t pay tax on it.
You don’t even feel it being added.
But at retirement?
You could easily have ₹25–40 lakhs (depending on interest rates & scheme type).
Imagine receiving that amount at 58 or 60 — tax-free.
That’s why superannuation matters more than people realise.
Different Scenarios: How Tax Works When You Withdraw
1. On Retirement / Superannuation: The lump sum (commutation) is tax-free under Section 10(13).
2. If You Change Jobs
- Most people worry that leaving the company means losing superannuation. But:
-
If the new employer has an approved fund: transfer is tax-free
-
If not: you may withdraw as per rules (partly taxable)
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3. On Death of Employee: Payment to nominee is fully exempt.
4. On Disability or Ill-health: Commutation is fully exempt.
5. If You Withdraw Before Retirement: This is where many people get confused. Early withdrawal may be taxable unless it meets specific conditions of Section 10(13).
Also Read: Claim Rent Deduction Even If You Do Not Get HRA
Why Superannuation Is Still One of the Best Retirement Benefits
Even though not all companies offer it, superannuation has unmatched advantages:
- Employer-funded retirement savings: You build wealth without reducing your take-home salary.
- Generous tax benefits: Sections 10(13), 80C, and 17(2) make it extremely tax-efficient.
- Long-term compounding: Twenty or thirty years of steady contributions grow significantly."
- A meaningful cushion at retirement: It complements PF, gratuity, and NPS beautifully.
A Small Real-Life Moment
I once saw an employee cry — in a good way — when she received her superannuation payout after 32 years of service.
She said,
“I always ignored that line in my CTC. I didn’t know it would one day give me this much peace.”
That’s the beauty of superannuation.
It works quietly in the background, but the comfort it brings at the end is loud & life-changing.
Key Takeaways About Superannuation Tax Sections
- Section 10(13) → Tax exemption on payments from approved funds
- Section 36(1)(iv) → Employer can claim deduction
- Section 17(2) → Employer contribution beyond ₹1,50,000 becomes taxable perquisite
- Section 80C → Employee contributions qualify for deduction
- Fourth Schedule, Part B → Rules for approval & operation of funds
Also Read: Extra Deduction on Home Loan Interest for First-Time Buyers
Conclusion
Superannuation is one of those benefits that doesn’t shine loudly like bonuses or increments, but quietly secures your future in a way that becomes priceless with age. Understanding the tax sections that govern it — especially Section 10(13), Section 36(1)(iv), Section 80C, and Section 17(2) — helps you make the most of this hidden gem in your salary structure.
And if you ever need help understanding your superannuation withdrawals, tax treatment, or retirement planning, the experts at CallMyCA.com are always there to support you with clarity & care.
