Retirement Planning India

The taxation of capital gains on these schemes is as per normal mutual fund debt or equity taxation rules- depending upon the nature of asset allocation of the scheme. Investments can be done via Systematic Investment Plan on a monthly or annual basis to keep up regular investing into the retirement goal. Lock-in Period and Withdrawal prior to Retirement Most Pension mutual funds have a lock-in of 5 years or retirement whichever is earlier, in order to bring discipline in investing for retirement goals. On completion of lock-in, one can choose to withdraw lump sum or take annuity payments in the form of a Systematic withdrawal plan. Some schemes also have a high exit load till a period of 5 years in order to discourage the early exit of funds by investors. Systematic Withdrawal on Retirement akin to Annuity with Benign Taxation An Annuity is paid out by most pension funds in the form of a monthly or annual installment – in order to enable the subscriber to meet his regular expenses. Pension schemes from mutual funds do not provide this annuity – instead one can choose the option to take a systematic withdrawal (SWP) from the scheme. Under this option, a specified amount can be withdrawn every month from the accumulated corpus as and SWP – this is akin to having an annuity payment coming in every month from the pension fund. Since SWP includes one’s capital invested as a part of the amount withdrawn – the taxation of the SWP is much better than that of an annuity payment or of a dividend receipt. An annuity is considered as a part of the subscribers’ income and he has to pay tax as per his marginal rate on this amount. The dividend taxation also having changed to the marginal rate of tax from 1st April 2020, implies a heavy rate of taxation if one avails for dividend payout options on their investments to ensure regular inflow. Under SWP, one also has the benefit of the Rs. 1 lac exemption on capital gains in the financial year. The investor is only liable to pay tax on capital gains over and above this Rs. 1 lac Since a major portion of the SWP received is capital, the amount of gain included in the SWP is relatively smaller hence one is subject to lesser tax. CFP Level 2 - Module 1 - Retirement Planning - India Page 51

It may be noteworthy here that the Rs. 1 lakh exemption limit on capital gains applies only under schemes where equity related investments are above 65% of the fund corpus. one has to choose the fund option where such condition is fulfilled to avail of this exemption. Pension plans from insurance companies Life Insurance companies offer pension plans in India. These plans are considered insurance-cum- investment There are two types of pension plans offered by Insurance companies: a. Immediate annuity Plans: In this plan lump sum amount is to be invested thereafter regular income or pension is provided immediately at the end of every period. b. Deferred Annuity Plans: these plans have two phases to their tenure – the accumulation phase and the vesting phase. During the accumulation phase, the policyholder deposits premiums on a regular basis in the policy and the amount thus accumulated continues to grow till the vesting date. On reaching the vesting age, the policyholder can commute up to 60% of the amount thus accumulated tax free and the rest has to be used to purchase an annuity. Unit Linked Pension Plans Market-linked investments from insurance plans are called Unit Linked. In ULIP plans, it is in the hand of investors to decide the investment portfolio. A unit linked policy is locked in for a period of 5 years with no option to withdraw the policy either partially or wholly before completion of the lock-in. CFP Level 2 - Module 1 - Retirement Planning - India Page 52

FUND DETAILS ASSET CLASS RISK & RETURN Money Government Equity RATING Securities, Fixed Market Income Instruments, Instruments & Cash & Bonds Deposits FUND COMPOSITION Equity To generate long term 0% to 0% to 20% 80% Very High Oriented- capital appreciation in 20% to Aggressive 100% line or better than Nifty index returns Income To deliver High 0% to 80% to100% - Moderate oriented - potential returns due 20% Moderate to investments in instruments with higher duration and credit exposure Capital To invest in high 0% to 40% to 100% - Low Protection grade fixed income 60% oriented - Conservative instruments and Government securities at the short end of the yield curve,to deliver stable returns Mortality and Tax Benefits Pension insurance plan provide insurance cover also during accumulation period, therefore insurance companied deduct some premium by cancelling units. This is called mortality charges. CFP Level 2 - Module 1 - Retirement Planning - India Page 53

In case of the insured’s death during the term of the policy, the nominee is eligible to receive the sum assured. On the death of the policyholder post the retirement age and the beginning of the annuity payments, the nominee has an option to take the death benefit as a lump sum or purchase an annuity from the amount. Tax treatment: The premium paid is deductible under section 80CCC of the Income Tax Act 1961 subject to a maximum permissible limit of Rs. 1.5 lacs under section 80C. On reaching the vesting age (which is the age at which the policy begins to pay annuity), the policyholder has a choice to commute up to 60% of the accumulated corpus (as per changed rules of the IRDA from July 2019) and the remaining is used to purchase annuity. The commuted amount is exempt from tax while the annuity received from the policy thereon is added to the Gross taxable income of the policyholder and taxed at the marginal slab rate of tax. Death benefit received by the policyholder’s nominee is tax-free. However if the nominee chooses to continue receiving annuity payments, such payments would be taxable at the nominee’s slab rate like in the case of the policyholder. In case of surrender of policy, if the policyholder has availed tax benefits under section 80C on the premium payments, the surrender value is added back to his income and charged to tax. In case of not having availed tax benefits, the surrender value is reduced for the capital amount i.e. the premiums paid and the rest is chargeable to tax at the policyholder’s slab rate. Lock-in Period: The policy is locked in for a period of 5 years from inception – before the completion of which no partial or whole withdrawals are allowed. Annuities provided by traditional insurance plans: As we know there are two types of annuities plans i.e. immediate annuity plans and deferred annuity plans. In deferred annuity plan money is invested in government securities or corporate bonds till vesting age. CFP Level 2 - Module 1 - Retirement Planning - India Page 54

We are taking an example of LIC Jeevan Akshay-VII Immediate annuity plan. Introduction: • This is an Immediate Annuity plan wherein the Policyholder has an option to choose type of annuity from 10 available options on payment of a lump sum amount. • The annuity rates are guaranteed at the inception of the policy and annuities are payable throughout the lifetime of Annuitant(s). Annuity Options: The available annuity options under this plan are as under: Option A: Immediate Annuity for life. Option B: Immediate Annuity with guaranteed period of 5 years and life thereafter. Option C: Immediate Annuity with guaranteed period of 10 years and life thereafter. Option D: Immediate Annuity with guaranteed period of 15 years and life thereafter. Option E: Immediate Annuity with guaranteed period of 20 years and life thereafter. Option F: Immediate Annuity for life with return of Purchase Price. Option G: Immediate Annuity for life increasing at a simple rate of 3% p.a. Option H: Joint Life Immediate Annuity for life with a provision for 50% of the annuity to the Secondary Annuitant on death of the Primary Annuitant. Option I: Joint Life Immediate Annuity for life with a provision for 100% of the annuity payable as long as one of the Annuitant survives. Option J: Joint Life Immediate Annuity for life with a provision for 100% of the annuity payable as long as one of the Annuitant survives and return of Purchase Price on death of last survivor. Annuity option once chosen cannot be altered. Minimum Annuity: CFP Level 2 - Module 1 - Retirement Planning - India Page 55

Tax benefit: During accumulation period premium paid by insured can claim u/s 80 C. And annuity is taxable. Government sponsored regular income schemes Senior Citizens Savings Scheme (SCSS) is a government-backed savings instrument offered to Indian residents aged over 60 years. The deposit matures after 5 years from the date of account opening but can be extended once by an additional 3 years. The SCSS interest rate for April to June 2020 has been set at 7.4%. This is the highest interest rate among the various small savings schemes in India. History of interest rate in SCSS: CFP Level 2 - Module 1 - Retirement Planning - India Page 56

Salient Features: a) Who can open:- (i) An individual above 60 years of age. (ii) Retired Civilian Employees above 55 years of age and below 60 years of age, subject to condition that investment to be made within 1 month of receipt of retirement benefits. (iii) Retired Defense Employees above 50 years of age and below 60 years of age, subject to condition that investment to be made within 1 month of receipt of retirement benefits. (iv) Account can be opened as individual capacity or jointly with spouse only. (v) The whole amount of deposit in a joint account shall be attributable to the first account holder only. (b) Deposit:- (i) Minimum deposit shall be Rs. 1000 and in multiple of 1000, subject to maximum limit up to Rs. 15 lakh in all SCSS accounts opened by an individual. (ii) In case any excess deposit made in SCSS account, excess amount will be refunded immediately to the depositor and only PO Savings Account Interest rate will be applicable from the date of excess deposit to the date of refund. (iii) Investment under this scheme qualifies for the benefit of section 80C of Income Tax Act, 1961. (c) Interest:- (i) Interest shall be payable on quarterly basis and applicable from the date of deposit to 31st March/30th June/30th September/31st December. (ii) If the interest payable every quarter is not claimed by an account holder, such interest shall not earn additional interest. (iii) Interest can be drawn through auto credit into savings account standing at same post office, or ECS. In case of SCSS account at CBS Post offices, monthly interest can be credited into savings account standing at any CBS Post Offices. (iv) Interest is taxable if total interest in all SCSS accounts exceeds Rs.50,000/- in a financial year and TDS at the prescribed rate shall be deducted from the total interest paid. No TDS will be deducted if form 15 G/15H is submitted and accrued interest is not above prescribed limit. (d) Premature Closure:- (i) Account can be prematurely closed any time after date of opening. (ii) If account closed before 1 year, no interest will be payable and if any interest paid in account shall be recovered from principle. (iii) If account closed after 1 year but before 2 year from the date of opening, an amount equal CFP Level 2 - Module 1 - Retirement Planning - India Page 57

to 1.5 % will be deducted from principal amount. (iv) If account closed after 2 year but before 5 year from the date of opening, an amount equal to 1 % will be deducted from principal amount. (v) Extended account can be closed after the expiry of one year from the date of extension of the account without any deduction. (e) Account closure on maturity:- (i) Account may be closed after 5 year from the date of opening by submitting prescribed application form with passbook at concerned Post Office. (ii) In case of death of account holder, from the date of death, account shall earn interest at the rate of PO Savings Account. (iii) In case spouse is a joint holder or a sole nominee, account can be continued till maturity if spouse is eligible to open SCSS account and not have another SCSS Account. (f) Extension of Account:- (i) Account holder may extend the account for further period for 3 years from the date of maturity by submitting prescribed form with passbook at concerned post office. (ii) Account can be extended within 1 year of maturity. (iii) Extended account shall earn interest at the rate applicable on the date of maturity. Taxability on Senior Citizens Savings Scheme  Investments made in a Senior Citizen Savings Scheme account qualify for income tax deduction benefit up to Rs. 1.5 Lakh under Section 80C of the Income Tax Act, 1961.  Interest on SCSS is fully taxable. In case the interest amount earned is more than Rs. 50,000 for a fiscal, Tax Deducted at Source (TDS) is applicable to the interest earned. This limit for TDS deduction on SCSS investments is applicable from AY 2020-21 onwards. Post Office Monthly Income Scheme (POMIS) Monthly Income Scheme is offered by Post offices and banks in the country. In this scheme investor needs to invest lump sum and thereafter every month will receive interest and at the time of maturity invested money will be returned to hi. The rate currently being offered is 6.6% p.a. payable monthly. Minimum and Maximum investment: CFP Level 2 - Module 1 - Retirement Planning - India Page 58

 In multiples of INR 1000/-  Maximum investment limit is INR 4.5 lakh in single account and INR 9 lakh in joint account  An individual can invest maximum INR 4.5 lakh in MIS (including his share in joint accounts)  For calculation of share of an individual in joint account, each joint holder have equal share in each joint account. (a) Who can open:- (i) a single adult (ii) Joint Account (up to 3 adults) (Joint A or Joint B)) (iii) a guardian on behalf of minor/ person of unsound mind (iv) a minor above 10 years in his own name. (b) Deposit:- (i) Account can be opened with minimum of Rs. 1000 and in multiple of Rs. 100. (ii) A maximum of Rs. 4.50 lakh can be deposited in a single account and 9 lakh in Joint account. (iii) In a joint account, all the joint holders shall have equal share in investment. (iv) Deposits/shares in all MIS accounts opened by an individual shall not exceed Rs. 4.50 lakh. (iv) Limit for account opened on behalf of a minor as guardian shall be separate. (c) Interest:- (i) Interest shall be payable on completion of a month from the date of opening and so on till maturity. (ii) If the interest payable every month is not claimed by the account holder such interest shall not earn any additional interest. (iii) In case any excess deposit made by the depositor, the excess deposit will be refunded back and only PO Savings Account interest will be applicable from the date of opening of account to the date of refund. (iv) Interest can be drawn through auto credit into savings account standing at same post office, or ECS. In case of MIS account at CBS Post offices, monthly interest can be credited into savings account standing at any CBS Post Offices. (v) Interest is taxable in the hand of depositor. (d) Pre-mature closure of account:- (i) No deposit shall be withdrawn before the expiry of 1 year from the date of deposit. (ii) If account is closed after 1 year and before 3 year from the date of account opening, a deduction equal to 2% from the principal will be deducted and remaining amount will be paid. CFP Level 2 - Module 1 - Retirement Planning - India Page 59

(iii) If account closed after 3 year and before 5 year from the date of account opening, a deduction equal to 1% from the principal will be deducted and remaining amount will be paid. (iv) Account can be prematurely closed by submitting prescribed application form with pass book at concerned Post Office. (e) Maturity:- (i) Account may be closed on expiry of 5 years from the date of opening by submitting prescribed application form with pass book at concerned Post Office. (ii) In case the account holder dies before the maturity, the account may be closed and amount will be refunded to nominee/legal heirs. Interest will be paid up to the preceding month, in which refund is made. (f) Tax:- There is no tax benefit in this scheme. It means investment does not qualify u/s 80C and interest is completely taxable. Reverse Mortgage With increased urbanization and prevalent nuclear family culture, many senior citizens are forced to fend for themselves. This situation has been aggravated by increase in the cost of living accompanied by longer life expectancy, thus making it very difficult for the senior citizens to make both the two ends meet. In order to help those senior citizens who own their house but don’t want to sell it, the Government of India introduced reverse mortgage a scheme in 2008. This scheme is exact ‘reverse’ of plain home loan scheme. In case of a home loan one takes a lump sum loan and repays it in installments in future. Under the reverse mortgage scheme, you get installments and the loan is repayable in lump sum in future. Here, the payment stream comes to the borrower for a fixed period of time in the form of monthly, quarterly or yearly payments. The maximum permissible monthly payments under this scheme cannot exceed Rs. 50,000 per month. You can even get lump sum payments under reverse mortgage loan however the total amount which you can get as lump sum which cannot be more than 50% of the total eligibility amount subject to a maximum of Rs.15 lakh. The one time lump sum loan can only be taken for the purpose of meeting medical expenses for yourself, your spouse or any dependent person. CFP Level 2 - Module 1 - Retirement Planning - India Page 60

The money receivable under regular reverse mortgage scheme money so borrowed can only be used for the genuine needs of the owner like medical emergencies, day to-day expenses, repairs and renovation or repayment of loan taken for the same property. Pre-requisites for availing reverse mortgage: The reverse mortgage loan is available to any person who is owner of a residential house property and has completed 60 years of age. In case of a couple wishing to avail this scheme, one of the spouses should have completed 60 years of age and the other should be over 55 years of age, though it is not necessary that only a couple can avail this loan. Even a person who is single and a senior citizen, can avail loan under reverse mortgage scheme but the property should be owned by him/ her You need to mortgage your residential property which is being used by you as your own residence. So the property should be used by the person who is taking this loan as his primary residence. Moreover the property should be self-acquired, implying you cannot get a loan on inherited property or any property received by you as gift. Therefore under this scheme you cannot mortgage any other property like commercial property or other residential property which is let out though owned by you. Even in case of a property on which any loan has been taken cannot be used for taking this reverse mortgage until and unless entire loan has been repaid. Tenure: Various banks have devised their own schemes within the framework of the scheme announced by the government. Broadly the tenure of such loan shall not be more than twenty years. This is the period during which the owner of the house will continue to receive the periodic payments. However in case the borrower outlives the tenure of the loan, the payment stream shall stop but he can still continue to stay in the house. Even after his death, his spouse can also continue to stay in the same house without having to worry about repayment of the loan. CFP Level 2 - Module 1 - Retirement Planning - India Page 61

Rate of Interest: The rate of interest will vary from one lender to another. It is generally in between 9.5% - 11% p.a. The lenders are free to provide the loans under fixed or floating rate regime. Taxation aspect of reverse mortgage: As per the provisions of income Tax act, 1961, the act of mortgaging the property for the purpose of securing reverse mortgage is not treated as transfer affecting any tax liability. Moreover the money received by the owner of the property under reverse mortgage shall not be treated as income.. However it is important to note that as and when the property is disposed of, either by the bank or the borrower or its legal heirs, the normal provisions of capital gains will apply and the owner or his legal heirs shall be liable to pay capital gains tax as per the provisions applicable to general sale of property. However if the legal heirs decide not to sell the property but pay the outstanding dues fully, no tax implications will arise as redemption of the property does not amount to transfer. So from the above it becomes very clear that reverse mortgage is the golden walking stick in the hands of senior citizens in their old age and has come to rescue of such senior citizens who stay in their own house. Reverse Mortgage Loan Enabled Annuity (RMLeA) In RML people are very much confused about the tenure of loan. To solve this problem Reverse Mortgage Loan enabled Annuity (RMLeA) has been introduced by the National Housing Bank in collaboration with Star Union Daichi Life Insurance Company Ltd., and Central Bank of India. Reverse Mortgage Loan enabled Annuity (RMLeA) provides higher annuity payments for the entire lifetime of the annuitant to ensure he lives with dignity after retirement. Difference between RML and RMLeA as given below: CFP Level 2 - Module 1 - Retirement Planning - India Page 62

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Chapter 4: Employee Benefits on Superannuation Gratuity The first and foremost retirement benefit that every employer would have in place is Gratuity. Gratuity is a lump sum payment to any employee when he retires or leaves service. It is basically a retirement benefit to an employee so that he can live life comfortable after retirement. 1. Payment of Gratuity is a Defined Benefit. 2. Gratuity is a lump sum payment to any employee when he retires or leaves service. 3. Gratuity means, “money given in recognition of services” as per Oxford Dictionary. 4. It is a gratuitous payment or a parting gift towards his employees when the employees part with him after rendering long and faithful service. Passing of Legislation: 1. The states of Kerala and West Bengal pioneered to make gratuity a legal payment by passing legislations. 2. Kerala in 1970 and 3. West Bengal in 1971. 4. The Central Government got a legislation passed by the Parliament in 1972. 5. Now, it is a statutory benefit under the Payment of Gratuity Act 1972. Gratuity can be either received by:  The employee himself at the time of his/her retirement, Or  The legal heir in the event of the death of the employee. CFP Level 2 - Module 1 - Retirement Planning - India Page 65

Coverage: 1. The whole of India 2. But in the State of Jammu & Kashmir, not applicable to plantations or ports. Application: 1. Every factory, mine, oilfield, plantation, port and Railway Company; 2. Every shop or establishment – within the meaning of any law in a State, and in which 10 or more persons are or were employed, on any day of the preceding 12 months; 3. Any other establishments with 10 or more employees, as the Central Government may notify in this behalf. Note: A shop or establishment to which this Act has become applicable shall continue to be governed by this Act – not withstanding that the number of persons employed therein at any time falls below 10. So, once covered, always covered. Employee: “Employee” means any person (other than an apprentice) employed on wages, to do any type of work and whether or not such person is employed in a managerial or administrative capacity. Continuous Service (Clause 1): \"Completed year of service” means continuous service for one year. An employee shall be said to be in continuous service for a period of one year if he has, for that period, been in uninterrupted service – including service which may be interrupted on account of  sickness,  accident,  leave,  absence from duty without leave, CFP Level 2 - Module 1 - Retirement Planning - India Page 66

 Lay off (not strike),  strike or lockout or cessation of work not due to any fault of the employee. The period of service not to be included :  Absence treated as ‘break in service’ has in accordance with rules or regulations governing the employees.  Strike or lockout or cessation of work due to any fault of the employee. One year service – Continuous Service (Clause 2) Where an employee is not in continuous service within the meaning of clause (1), he shall be deemed to be in continuous service a) for the period of one year If he as actually worked for not less than – i) 190 days in the case of an employee employed below the ground in a mine or in an establishment which works for less than 6 days in a week and ii) 240 days, in any other case; b) for the said period of 6 months If he has actually worked for not less than – i) 95 days in the case of an employee employed below the ground in a mine or in an establishment which works for less than 6 days in a week and ii) 120 days in any other case. Period not to exclude:  For the purpose of Clause (2), it shall include the days of –  Permitted lay-off  Leave with full wages  Absent due to temporary disablement caused by accident arising out of and in the course of his employment; and  In the case of a female, maternity leave not exceeding 12 weeks. CFP Level 2 - Module 1 - Retirement Planning - India Page 67

Service of a Seasonal Employee:  An employee, employed in a seasonal establishment, shall be deemed to be in continuous service for a season if he has actually worked for not less than 75% of the number of days on which the establishment was in operation. WAGES Section 2 (s)  “Wage” as per act = Basic + D.A.  Does not include – any bonus, commission, house rent allowance, overtime wages and any other allowance. Forfeiture of Gratuity: A. The gratuity payable to an employee may be wholly or partially be forfeited if the services are terminated i) For his riotous or disorderly conduct or any act of violence ii) Moral turpitude B. If services of an employee are terminated on account of any act or willful omission or negligence causing – Damage or loss to, or destruction of Property belonging to the employer – Gratuity to the extent of such damage or loss can be forfeited. Nomination: 1. This facility is made available to an employee who has completed one year of service. 2. It provides for multiple nominations and proportions of the Gratuity to be earmarked for each of the nominees. 3. An employee can make the nomination only in favor of members of his family if he has a family. 4. Any nomination made in favor of a person who is not a member of the family is void after having family. CFP Level 2 - Module 1 - Retirement Planning - India Page 68

Protection of Gratuity:  No gratuity payable under this act shall be liable to attach in execution of any decree or order of any civil, revenue or criminal court. Entitlement of Gratuity:  Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than 5 years.  Continuous service of 5 years shall not be necessary where the termination of the employment is due to death or disablement.  Payment on Superannuation, Disability and Resignation from Employment  Gratuity is part of the defined benefit scheme by the employer to the employee rendering long service with him for more than 5 years.  This payment is generally due to him in superannuation or on his retirement/resignation  However, Gratuity is payable even when the employee is disabled wherein he/she is incapacitated for the work he/she was appointed to do before the accident or disease. It is also payable to the employee’s nominees or legal heirs in case of the employee’s death during his work tenure.  In these conditions, the rule of 5 years of minimum continuous service does not apply. Calculation of Gratuity: 1. Monthly rated employee: Rate as per section 4(2)  15 days wages (Basic + D.A.) for each year of completed service (more than 6 months to be taken as one year)  Wages – Terminal (last drawn salary)  To calculate per day wage monthly wages is divided by 26 (15/26) Ex. Mr. X joined on 1st day of September 1970 and retired on 30th April 2014 at Superannuation age of 60 years when his monthly emoluments were as under: CFP Level 2 - Module 1 - Retirement Planning - India Page 69

Basic salary Rs. 17,000; Dearness allowance Rs. 13,000; City Compensatory allowance Rs. 1,0000; House rent allowance Rs. 20,000. The company pays gratuity as per the Payment of Gratuity Act, 1972. Mr. X is entitled to get the gratuity amount of: Sol. Rs. 761538 15/26 *(17000+13000) *44 2. Piece rated employee  15 days wages (Basic + D.A.) for each year of completed service (More than 6 months to be taken as one year)  Monthly Wage = Average wages of last three months  To calculate per day wage monthly wages is divided by 26 (15/26) Ex. Rajeev is a piece rated employee working in a garment fabrication organization. He retires on June 01, 2007 after working 10 years. Total amount of last three months paid him was Rs. 40000 (Basic + DA +HRA + Overtime), which includes HRA and overtime Payment of Rs. 12000. What amount of Gratuity will be paid to him as per act? Sol. Rs. 53846.15385 15/26 * (28000/3) *10 3. Seasonal Employee  7 days wages (basic + D.A.) for each season of completed service  Monthly Wage = Last drawn salary  To calculate per day wage monthly wages is divided by 26 (7/26) Ex. An employee joined in the year 1994 in a seasonal mill. (one season in a year) After working as the years as a seasonal employee up to the year 2009. He retires with the following monthly salary: Basic Salary Rs. 8500 D A Rs. 2500 HRA Rs. 3000 How much Gratuity is payable to him as per act? Ans. Rs. 47384.61538 7/26 * (8500+2500) *16 CFP Level 2 - Module 1 - Retirement Planning - India Page 70

Concept Checker 1. What is the minimum number of employees in an establishment for it to come under the purview of the Payment of Gratuity Act? a. 20 and above b. Above 20 c. 10 and above d. Above 1 Ans: c 2. An establishment had 9, 10, 20, 9 and 8 employees in the years 2000, 2001, 2002, 2003 and 2004. Are the employees of that establishment covered under the Payment of Gratuity Act, 1972: a. Since 2000 b. Since 2001 c. Since 2002 d. Not now covered. Ans: b 3. What is the maximum amount of gratuity payable as payment of gratuity Act a. Rs. 3,50,000 b. Rs. 2,50,000 c. Rs. 20,00,000 d. No ceiling. Ans: c 4. How much amount of gratuity is payable for each year of completed service to the monthly rated employees? a. 15 days’ wages b. Half a month’s wages c. 20 days’ wages d. None of the above. Ans: a CFP Level 2 - Module 1 - Retirement Planning - India Page 71

5. How much amount of gratuity is payable for each season of service to the seasonal employees? a. 7 days’ wages b. 10 days’ wages c. 7.5 days’ wages d. None of the above. Ans: a 6. Wages for the purpose of gratuity payment means: a. Basic Pay b. Basic Pay and Dearness Allowance c. Basic Pay, Dearness Allowance, City Compensatory Allowance and House Rent d. Emoluments including all allowances, bonus and commission etc. Ans: b 7. Which of the following leave period is excluded from the period of Service for payment of gratuity? a. Without pay leave b. Maternity leave in case of female employee c. Sickness leave d. None of the above. Ans: d 8. Can an employer have an arrangement to pay gratuity higher than that prescribed under the Act? a. No b. Yes, but always within the prescribed ceiling on the maximum amount c. Yes, but always at the prescribed rate for each year of completed service d. Yes, at the same or a higher rate and with or without the prescribed ceiling. Ans: d CFP Level 2 - Module 1 - Retirement Planning - India Page 72

9. What is the maximum Tax Free gratuity in case of A) Gratuity payable to Govt. employees: a. Full amount of gratuity b. Rs. 20,00,000 c. Rs. 2,50,000 d. None of the above Ans: a B) Gratuity payable to employees in any other method than under the Act: a. 15 days’ terminal wages with a ceiling of Rs. 20,00,000 b. 15 days’ average wages of the last 10 months with a ceiling of Rs. 2,50,000 c. Half month’s terminal wages without ceiling d. Half month’s average wages of the last 10 months with a ceiling of Rs. 20,00,000. Ans: d 10. Mr. X joined in a company on 10th March 2007 and died in an accident on 30th October, 2007. The company pays gratuity as per the Payment of Gratuity Act. His terminal monthly wages was: Basic Pay Rs. 8000 D A Rs. 3000 HRA Rs. 2000 What amount his nominee would get as Gratuity? Ans. Rs. 6346.153846 15/26 * (8000+3000) *1 Tax Treatment of Gratuity Section 10 (10) (i): Any death-cum-retirement gratuity received by the Central Government or the State Government employees or the employees of a local authority or the employees of civil and services is exempt from tax Non-Govt. Employees Who are covered under the ‘the payment of Gratuity (Amendment) Act, 2010’ u/s 10(10)(ii) CFP Level 2 - Module 1 - Retirement Planning - India Page 73

For monthly rated employee: Minimum of three is exempted. 1. Actual Gratuity Received 2. Rs. 2000000 3. 15/26 multiply No. of completed year of services or part thereof exceeding 6 months * last drawn salary. Ex-1. Mr. X retired from a company where Gratuity Act is applicable after completing 30 years and 9 months. At the time of retirement his last drawn salary is Rs. 25,000 including HRA of Rs. 5000. He got the gratuity of Rs. 3,60,000. Calculate what is the amount of his Taxable Gratuity? Ans. 2308 Sol. Least of three is exempted 1. Actually received = 3,60.0000 2. 20,00,000 3. 15/26 * (25000-5000) *31 = 357692 Ex-2. Mr. X an employee of ABC Ltd. receives Rs. 3 lacs as gratuity. He retires on January 12, 20012after serving for 33 years and 6 months. At the time of retirement monthly salary of Mr. X was Rs. 12000. Calculate the taxable amount of gratuity if he covered under payment of gratuity act 1972? Ans. Rs. 71538.46154 Sol. Least of three is exempted 1. Actually received = 300000 2. 2000000 3. 15/26*12000*33 = 228461.5385 For seasonal employee Minimum of three is exempted. 1. Actual Gratuity Received 2. Rs. 2000000 3. 7/26 multiply no of seasons * last drawn salary. CFP Level 2 - Module 1 - Retirement Planning - India Page 74

Piece rated employee Minimum of three is exempted. 1. Actual Gratuity Received 2. Rs. 20,00,000 3. 15/26 multiply no of every completed year of service or part thereof exceeding 6 months * average of last 3 months salary Ex-1. Mr. X is a piece-rated employee. He receives a gratuity of Rs. 150000. He retires on March 31, 2012 after being employed for 15 years and 6 months. During the period 31-12-2011 to 31-03- 2012, he has been paid a total wages of Rs. 45000, which includes overtime of Rs. 5000. Calculate his tax exempted Gratuity? Ans. Rs. 115384.6154 Sol. Least of three is exempted 1. actually received = 150000 2. 2000000 3. 15/26 * {(45000-5000)/3} * 15 = 115384.6154 Taxable (1,50,000-115384.1154) = 34615 In case of other employees, u/s 10(10)(iii) Minimum of the following is example for tax 1. Actually gratuity received. 2. 20,00,000 3. Half month salary based on average salary (Basic + DA which forming part of retirement benefits + Fixed % commission on turn-over) of last 10 months preceding the month in which event occurs for every completed year. Taxability of Gratuity for private sector employees not covered under Gratuity Act. Payment of gratuity for prolonged term of service by an employee is a retirement benefit which is compulsory from enactment of the Gratuity Act, 1972. If the employee is not covered by payment of Gratuity Act then he can obtain benefit of Gratuity under terms of employment. Below mentioned details explain taxability of Gratuity received by private sector employees who are not covered under CFP Level 2 - Module 1 - Retirement Planning - India Page 75

Gratuity Act. When employee receives gratuity under terms of employment then he is not covered under Gratuity Act. From the 3 conditions mentioned below, the amount which is the lowest is exempt from tax. 1) Half month’s average salary for each completed year of service. 2) Maximum exemption limit is of Rs.20,00,000/- in a lifetime. 3) Actual Gratuity received at the time of retirement After exemption, the balance amount is taxable. Other key considerations while calculating tax exemption for employees not covered by payment of Gratuity Act are as follows: 1) For calculating length of service, fraction of a year shall be ignored. Only completed years of service is considered. 2) Average monthly salary is calculated on the basis of average salary of 10 months, immediately preceding the month in which employee retires. 3) Salary includes Basic Salary + Dearness Allowance which forms point of retirement benefit+ Commission paid on a fixed percentage of turnover. Taxation of Gratuity from more than 1 employer If Gratuity is received in the same year, exemption will be least of two: 1. 20,00,000 2. Sum of exempted gratuity from all employers. Ex. Mr. X retired from XYZ Ltd. after completing 28 years 7 months. Salary at the time of retirement is Rs. 12500 p.m. Actual gratuity received is Rs. 135000. Average salary for previous 10 months is Rs. 9350. Calculate the exempted amount of gratuity if XYZ Ltd. is not covered under Payment of Gratuity Act? Ans. 130900 Sol. Least of three is exempted 1. actually received = 135000 2. 20,00,000 3. ½ * 9350 *28 = 130900 CFP Level 2 - Module 1 - Retirement Planning - India Page 76

Special Provisions and Calculation of Gratuity payable on Death Gratuity payable depends upon two factors-  Numbers of years of service  Last drawn salary However, in case of death of employee, the gratuity is calculated and paid based on the length of the service and the maximum benefit is restricted to Rs. 20lacs Tenure of the service Amount to be Paid Less than 1 year 2 times the basic pay More than 1 year and less than 5 years 6 times the basic pay CFP Level 2 - Module 1 - Retirement Planning - India Page 77

More than 5 years but less than 11 years 12 times the basic pay More than 11 years but less than 20 years 20 times the basic pay More than 20 years Half of salary for every completed 6 monthly periods subject to a maximum of 33 times of the salary Activity Go through the provisions of the Payment of Gratuity Act, 1972, the wordings as existing now, given as additional reading at the end of the Topic. Also read the provisions of the Payment of Gratuity Rules notified by the respective Governments to be aware of the provisions. You can then enquire from a group of working persons in your neighborhood to ascertain the gratuity benefit that their employers have in place to realize the effect of the provisions of the Act. Leave Encashment Leave encashment falls under “Defined Benefit” category. Under this benefit, the employee gets cash payment for surrendering his unutilized leave that he has accumulated. Different types of leaves that an employee is entitled are: 1. Casual Leave/Emergency leave 2. Sick Leave/Medical leave 3. Privileged Leave Privilege leave can be accumulated during the service period. If the terms of the employment allow Privilege leave can be accumulated to avail a cash benefit by surrendering some of the leave accumulated while in service period or at the time of leaving. Encashment of leave by surrendering leave standing to one’s credit is known as ‘Leave Salary’. The employer would wish that only minimum leave is utilized so that office working is not affected. Because of this concern, though employers have provisions for leave and leave accumulations, they allow the employees to avail a cash benefit by surrendering some of the leave accumulated so that the utilization of the leave is reduced to that extent and the office working affected to a lesser extent. CFP Level 2 - Module 1 - Retirement Planning - India Page 78

If the employer has chosen to make payment for retirement benefits from his own funds, an appropriate charge to the statement of profit and loss for the year is made through a provision for Accruing Liability. This accruing liability is to be done by an Actuarial Valuation by qualified professional called actuaries. Tax treatment of Leave Salary Encashment during the Course of Employment Leave encashment to an employee, while he continues to be in service with the same employer, is fully taxable. In this case however, the assesses can claim relief under section 89(1) of the Income tax act. Encashment of accumulated leave at the time of retirement Section 10(10AA)(i) Is fully exempt for only Central and State government employees. Other employees Section 10(10AA)(ii) Leave encashment of the accumulated leave at the time of superannuation or otherwise received by other employees (including the employees of local authority and public sector undertakings) is exempt to the extent of the minimum of the following: 1. Leave Encashment actually received 2. 10* Average salary of last 10 months 3. Rs. 300000 4. Cash equivalent of un-availed leave calculated on the basis of maximum 30 days leave for every completed year. SALARY = Basic Pay + D. A. (forming part of retirement benefit) + Commission based upon fixed % of the turnover Average Salary = Average of the salary drawn by the employee during the period of 10 months immediately preceding the retirement. Leave salary paid to legal heirs of a deceased employee is not liable to tax. CFP Level 2 - Module 1 - Retirement Planning - India Page 79

Concept Checkers Q1. If earned leave credited to Rohit’s a/c is 40 days per year, what will be the maximum permissible un- availed leave under the income tax act, 1961 if he served for 26 years? Ans. 26*30 = 780 Q2. If earned leave credited to Mohit’s a/c is 24 days per year, what will be the maximum permissible un- availed leave under the income tax act, 1961 if he served for 30 years? Ans. 24*30 =720 Q3. Mr. X joined on 1st November 1998 in XYZ Ltd. and retired on 1st Novermber 2020. He got leave encashment of Rs. 415000. His last drawn salary is Rs. 40000.His last 10 months salary is 3.5 lacs. He availed 160 leave during the service. What will be his taxable leave salary amount? Ans. 115000 Least of four is exempted 1. Actually received i.e. 415000 2. Rs. 300000 3. 10*(350000/10) = 350000 4. (22*30-160)/30 * 35000 = 583333.333 Taxable (415000 – 300000) = 115000 Q4. Mr. Y joined on 1st January 1997 in XYZ Ltd. and retired on 1st August 2020. He got leave encashment of Rs. 315000. His last drawn salary is Rs. 22000.His last 10 months average salary is 25500. He availed 340 leave during the service. What will be his tax-exempted leave salary amount? Ans. 255000 Sol. Least of four is exempted 1. 315000 2. 300000 3. 10*25500=255000 4. (23*30-340)/30 *25500=297500 CFP Level 2 - Module 1 - Retirement Planning - India Page 80

Q5. Mr. X joined on 1-1-2003 and retires on 1/1/2020. He got amount of Rs. 36000 as leave encashment salary against 150 days of unavailed leave. His employer provides 40 days leave for each year of service. How much amount of leave salary would be tax free if his Average salary for the last 10 months is Rs. 8000? Ans. Nil Sol. Least of four is exempted 1. 36000 2. 300000 3. 10 * 8000 4. 0/30 * 8000 Max permissible leave 17*30 = 510 Leave already taken (17*40-150) = 530 Q6. Mr. A was employed with ABC Ltd. He retired w.e.f. 1-2-2020 after completing a service of 25 years and 8 months. He submits the following information : Basic Salary : Rs. 15000 p.m. at retirement D.A.: 100% of basic (40% of which forms part of salary of retirement benefits) He was entitled to 40 days leave for every year of service. He received leave encashment amounting to Rs. 60000 on account of 280 days leave. Calculate taxable amount? Ans. (60000-21000) = 39000 Sol. Least of four is exempted 1. 60000 2. 300000 3. 10*(15000+15000*.4) = 210000 4. 30/30*21000=21000 Max permissible leave as per act =25*30 = 750 Leave already taken (25*40-280) = 720 CFP Level 2 - Module 1 - Retirement Planning - India Page 81

4.3 Ex-Gratia Lump-sum Compensation An ex-gratia is a voluntary payment made by the employer without any obligation to make such payments. Often made by an organization or the government under the following circumstances –  To compensate for the damages incurred by the employee or his family during duty  As a goodwill gesture in time of company’s profits  As a part of the severance package in case of layoffs  As a means of compensation for loss of life or disability of the employee during service  To employees where bonus cannot be given or is not part of the standard compensation structure  In non-profit organizations such as hospitals or NGOs where the employer wishes to thank its employees for their dedication and service as a one-time gesture. There are generally no limits to the payment one can receive as ex-gratia since it depends on the situation and the employer’s discretion. This is not considered a part of the employee’s salary or regular compensation – could be considered an incentive. It is different from Bonus since it is not necessarily linked to the employee’s performance on the job and there is no minimum or maximum amount. Taxability of the ex-gratia payment- If a person or his heir receives ex-gratia from Central government/state government/ local authority/Public Sector Undertaking due to injury to the person/death while on duty such ex- gratia payment will not be taxable. (Source: https://www.incometaxindia.gov.in/Pages/faqs.aspx?k=FAQs%20on%20Salary%20Inco me) All other ex-gratia payments are taxable as profits in lieu of salary and included as part of the CTC for taxation purpose. CFP Level 2 - Module 1 - Retirement Planning - India Page 82

If the ex-gratia payment has been made at the time of layoff, it will be included in the severance pay and exempt to the extent of Rs. 5 lacs as per the provisions of the Industrial Dispute Act, 1947* *It is to be noted that the Industrial Dispute Act doesn’t apply to individuals working in managerial or supervisory capacity earning more than Rs. 10000 as wages per month. 4.4 Pension Scheme for Government Employees – Rules for commuting pension A government employee is eligible to receive pension after 10 years of qualifying service The minimum pension payable is Rs. 9000 per month and the maximum limit on the pension is 50% of the highest pay in the government of India - this is currently Rs. 125,000 per month. He/she can commute up to 40% of his/her due pension as a lump sum. The remaining has to be compulsorily used to purchase annuity Commutation of pension implies that the employee on retirement is withdrawing some amount of the pensions becoming due to him for the rest of his lifetime as a onetime lump sum withdrawal. The formula for commutation is as below – Commuted Value of pension = 40% x Commutation factor x 12 X Pension ordered Where, commutation factor will be as per the pensioner’s table and the reference age for the commutation factor that table will be the age on his next birthday Below is an example of the commutation factor table Age Commutation value Age Commutation value Age Commutation value next expressed as number next Expressed as number next expressed as number Birthday of year's purchase Birthday Of year's purchase Birthday of year's purchase 20 9.188 41 9.075 62 8.093 21 9.187 42 9.059 63 7.982 22 9.186 43 9.040 64 7.862 CFP Level 2 - Module 1 - Retirement Planning - India Page 83

23 9.185 44 9.019 65 7.731 24 9.184 45 8.996 66 7.591 25 9.183 46 8.971 67 7.431 26 9.182 47 8.943 68 7.262 27 9.180 48 8.913 69 7.083 28 9.178 49 8.881 70 6.897 29 9.176 50 8.846 71 6.703 30 9.173 51 8.808 72 6.502 31 9.169 52 8.768 73 6.296 32 9.164 53 8.724 74 6.085 33 9.159 54 8.678 75 5.872 34 9.152 55 8.627 76 5.657 35 9.145 56 8.572 77 5.443 36 9.136 57 8.512 78 5.229 37 9.126 58 8.446 79 5.018 38 9.116 59 8.371 80 4.812 39 9.103 60 8.287 81 4.611 40 9.090 61 8.194 CFP Level 2 - Module 1 - Retirement Planning - India Page 84

CFP Level 2 - Module 1 - Retirement Planning - India Page 85

https://pensionersportal.gov.in/pensioncalculators/revisedpensioncalculator/pensioncalculator _6pc.asp The formula for commutation is as below – Commuted Value of pension = 40% x Commutation factor x 12 X Pension ordered = 40% * 8.194 ( age next birthday i.e. 61)*12*45000 = 1769904 4.5 Family Pension Family pension is granted to the widow / widower or to the children of a Government servant who entered in service on or after 01/01/1964 but on or before 31.12.2003 and at the time of death was in receipt of pension. Family pension is payable to the children up to 25 years of their age, or marriage or till they start earning a monthly income exceeding Rs.9,000/- + DA Widowed/divorced/unmarried daughter is also entitled for the family pension till her remarriage or death or till she starts earning a monthly income exceeding Rs.9,000/- + DA Family pension is payable to wholly dependent parents of the deceased Government servants when he/she is not survived by a widow or eligible child. The family pension will be payable to mother first, failing which to the father. If the son or daughter, of a Government servant is suffering from any disorder or physical/mental disability so as to render him or her unable to earn a living even after attaining the age of 25 years, the family pension can continue to be paid for his/her lifetime The pension is at a uniform rate of 30% of the last drawn salary subject to a minimum of Rs. 9000 per month 4.6 Employees’ Deposit Linked Insurance Scheme (EDLIS) Page 86 Under Employee’s Provident Fund 1952, eligible employees 3 benefits which are: a. Employees Provident Fund CFP Level 2 - Module 1 - Retirement Planning - India

b. Employee’s Pension Scheme c. Employee’s Deposit Linked Insurance Scheme ( EDLIS) In EDLIS employee’s nominee or legal heirs are entitled to receive a lump sum insurance claim from the EPFO in case of death of the member during service. The objective of the scheme is to provide financial security to the family members of the employees covered under this scheme. The Insurance Claim Amount The claim amount of the EDLI is decided by the last drawn salary of the employee. The claim amount would be the 30 times of the salary. Along with this, the bonus of Rs 1.5 lakh is also given. For this calculation salary is ‘basic pay plus DA’. Calculation of claim amount = 30 X Average monthly salary (Including DA) for the last 12 months (capped at Rs. 15000) + 50% of the average balance in the member’s account during the last 12 months of his membership) capped at Rs. 1.5lacs For example, if Basic+ DA of an employee is Rs.15000 and average PF balance in his account preceding the month in which he died is Rs.240000. He will get (30*15000+ 50% of Rs.240000)= Rs.5,70,000. The minimum pay-out under EDLI insurance is Rs. 2.5 lacs and the maximum is Rs. 6 lacs Features of the EDLI –  All private sector salaried employees contributing to the EPFO or their organization’s registered Employee provident fund scheme are eligible for the EDLI benefit.  The age group of the employees covered is between 18 to 85 years of age  There is a bonus of Rs. 1.5lacs available under the EDLI scheme  Once all documents are provided and the EPFO commissioner has accepted the clam, the payout has to be done within 30 days from the receipt of the claim. Otherwise the claimant is entitled to receive interest at 12% p.a. on the claim amount CFP Level 2 - Module 1 - Retirement Planning - India Page 87

Contribution: Employee > nil Employer > 0.5% of salary but salary should not be more than Rs.15000( basic + DA ) This means Rs.75 is the maximum contribution made by employer. 4.7 Pensions in Public Sector Bank and other Public Sector Enterprises The Government of India paid pension to all its employees under the CCS (Centralized Civil Services Pension Rules 1972) provided their joining date was before 1.1.2004 or their appointment was finalized before 1.1.2004 and joined service after that date. The employee had to complete 10 years of qualifying service for a pension. There is a point that employees of government sector and public sector who joined job on after 1st April 2004, would not get inflation linked pension. They will be covered under National Pension System, which is known as New Pension Scheme (NPS) apart from those working in defence ministries. NPS is considered a defined contribution plan for government and PSU employees who joined their job on after 1st April 2004. This scheme is based on two tiers – Tier 1- contribution to Tier1- is compulsory for getting pension. It is considered pension account Tier2 – Optional and this account will work just like your saving account. CONTRIBUTION: Employee > other than central government employee 10% basic salary + DA (dearness allowance) Tier 1 account. Employer > matching contribution by the employer But central government contributes 14% of basic and DA for its employees. Since tier-2 accounts are voluntary, the government does not make any contributions to this account. CFP Level 2 - Module 1 - Retirement Planning - India Page 88

For employees who joined the Public sector enterprise prior to 1.1.2004, the old Central Civil Services Pension rules apply. The Pension to a Public Sector Bank or enterprise employee is to be 50% of their average emoluments provided the employee has worked for more than 33 years for the PSU. In case, the number of qualifying service years is below 33 years, the basic pension would be proportionate to their service. The different classes of pensions available for the public sector/government employees- Superannuation A superannuation pension shall be granted to a employee who is retired on his attaining the age of superannuation. The minimum service of 10 years is required if employee retires at superannuation age. And maximum service is considered 33 years while calculating pension. Pension on Voluntary Retirement (VRS): Employees who take voluntary retirement from the government job, are eligible to receive VRS pension. The minimum tenure of service to opt for VRS is 20 years. Voluntary Retirement: Any Government servant can apply for voluntary retirement, three months in advance, only after the completion of twenty years of his qualifying service, provided there is no vigilance or Departmental Enquiry pending /initiated against him/her. Invalid Pension: Invalid Pension may be granted if a Government servant applies for retirement from the service on account of any bodily or mental infirmity which permanently incapacitates him/her for the service. The request for invalid pension has to be supported by medical report from the competent medical board. The minimum number of years of service has to be 10 years to qualify for this pension CFP Level 2 - Module 1 - Retirement Planning - India Page 89

He may also be granted invalid pension even without completing 10 years in service, provided he was examined by the medical authority either before or after appointment and was declared fit for government service. The pension is at 50% of average emoluments subject to a minimum of Rs.9000 and maximum of Rs.125, 000 per month. Compassionate Allowance: (i) A Government servant who is dismissed or removed from service shall forfeit his pension and gratuity: Provided that the authority competent to dismiss or remove him from service may, if the case is deserving of special consideration, sanction a compassionate allowance not exceeding two-thirds of pension or gratuity or both which would have been admissible to him if he had retired on compensation pension. (ii) A compassionate allowance sanctioned under the proviso to sub-rule (i) shall not be less than Rs. 9,000/- p.m. Compulsory Retirement Pension: A Government servant compulsorily retired from service as a penalty may be granted, by the authority competent to impose such penalty, pension or gratuity, or both at a rate not less than two-thirds and not more than full compensation pension or gratuity, or both admissible to him on the date of his compulsory retirement. The pension granted or allowed shall not be less than Rs. 9,000/- p.m. Extraordinary Pension: Extraordinary Pension in the form of Disability pension/extraordinary family pension may be paid to the Government servant/his family if disablement/death (or the aggravation of disablement/death)of the Government servant, during his service, are attributed to the Government service. For the award of extraordinary pension, there should thus be a casual connection between disablement and Government service; and death and Government service, for attributability or aggravation to be conceded. The quantum of the pension, however, depends upon the category of the disablement/death. Government servants appointed on or after 1.1.2004 are not covered by the CCS(Extraordinary Pension) Rules. CFP Level 2 - Module 1 - Retirement Planning - India Page 90

Family Pension: The nominees/dependents/legal heirs of the employee are eligible to receive family pension in case of death of the employee during service. The pension amount is about 50% of the last pay drawn or average emoluments whichever is more beneficial. Families of government employees who passed away before completing 7 years of service are also eligible to receive 50% of average emoluments as family pension for 10 years. Widow daughter / divorced daughter/ unmarried daughter of deceased Government servant is also entitled for the family pension till her remarriage or up to life time or starts earning a monthly income exceeding Rs.9,000/- + DA admissible from time to time p.m. whichever is earlier. Family pension is payable to wholly dependent parents of the deceased Government servants w.e.f. 01/01/98, when he/she is not survived by a widow or eligible child. The family pension will be payable to mother first, failing which to the father. If the son or daughter, of a Government servant is suffering from any disorder or disability of mind or is physically crippled or disabled so as to render him or her unable to earn a living even after attaining the age of 25 years, the family pension can continue to be paid for life time subject to conditions. CFP Level 2 - Module 1 - Retirement Planning - India Page 91