What do you understand by Superannuation Fund? How is it taxed?

A superannuation fund is a form of employee welfare that is usually applied to very senior employees. The employee's contribution, the employer's contribution, and interest thereon are paid to the employee after the employee ceases to be an employee, and in case of death, to the employee's legal heirs.

Here’s how a superannuation fund is taxed:

• An employee’s contribution to the superannuation fund is eligible for a tax rebate under Section 80C.
• On the other hand, the employer’s contribution to the superannuation is completely exempt from taxes.
• Interest on the accumulated balance in the superannuation fund is exempt from tax.
• The amount paid to the employee in lieu of or in commutation of an annuity on his retirement on or after the specified age or on his becoming incapacitated prior to such retirement is exempt from tax.
• The amount paid by way of refund of contribution to the legal heirs on the death of the beneficiary is also exempt from tax.