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Pension is described in section 60 of the CPC and section 11 of the Pension Act as a periodical allowance or stipend granted on account of past service, particular merits etc. There are three important features of ‘pension’. Firstly, pension is a compensation for past service. Secondly, it owes its origin to a past employer-employee or master-servant relationship. Thirdly, it is paid on the basis of earlier relationship of an agreement of service as opposed to an agreement for service. This relationship terminates only on the death of the concerned employee.

Pension received from a former employer‘. Hence, the various deductions available on salary income, are also available to pensioners.

Pension to officials of UNO is exempt from taxation.


Family Pension

Family pension is defined in Section 57 as a regular monthly amount payable by the employer to a person belonging to the family of an employee in the event of his/her death. Pension and family pension are qualitatively different. The former is paid during the lifetime of the employee while the latter is paid on his/her death to surviving family members. However, in case of family pension, since there is no employer-employee relationship between the payer and the payee, therefore, it is taxed as ‘Income from Other Sources’ in the hands of the nominee(s). In respect of family pension, deduction u/s 57(iia) of Rs. 15000/- or 1/3rd of the amount received whichever is less, is available.



Section 17(1) of the Income tax Act gives an inclusive and not exhaustive definition of “Salaries” including therein (i) Wages (ii) Annuity or pension (iii) Gratuity (iv) Fees, Commission, perquisites or profits in lieu of salary (v) Advance of Salary (vi) Amount transferred from unrecognized provident fund to recognized provident fund (vii) Contribution of employer to a Recognized Provident Fund in excess of the prescribed limit (viii) Leave Encashment (ix) Compensation as a result of variation in Service contract etc. (x) Contribution made by the Central Government to the account of an employee under a notified pension scheme.



Education cess @ 3% on Income Tax and Surcharge If any.

Surcharge on Income Tax @ 10% if the Income exceeds Rs. 1 crore.

Also read —-income-tax-slabs-for-senior-and-super-senior-citizens

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CA Final IDT video classes by Farooq Haque.It covers entire concepts of Service tax,Custom,Excise


Important Points:

  1. Pensioners can File their Income Tax returns under the Head Salary.
  2. They have to file ITR-1, if they does not have any other Income.
  3. The Pensioners can avail the Deductions u/s 80C, 80D, 80G, 80TTA, 80U and so on. They will same benefits with those of normal Tax payer Individuals.
  4. They will also have TAX Rebate of Rs.2000 u/s 87A if their taxable pension is not more than  5Lakhs.

And all Income Tax benefits which a Individual enjoys are available to a Pensioner.






Click here to Download FAQs on Pension Payment by Banks

Aslo Read—tax-on-short-term-capital-gains


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  1. Aditya says:

    It has been clarified that the standard deduction on family pension is admissible to the extent of 1/3rd of family pension or Rs 15,000, whichever is less. My query is that the deduction of Rs 15,000(in my case it’s 15000) have to be done in which column or head of ITR-1 income tax return form or we have to self deduct this 15000 amount from family pension and enter the remaining amount of family pension in [Income from other sources] column/head of ITR-1.

    AS in case of Interest Income from banks. We have to show this interest income in Income from other sources Column/head of ITR-1. In case if interest income from bank is 18000 then we have to show 18000 in column [Income from other Sources]. and deduction of interest of 10000(in this case) comes in column 5q i.e 80TTA.

    Similarly, i want to know that the deduction of Rs 15,000 (in case of family pension) have to be done in which column or head of ITR-1 form or we have to self deduct this 15000 amount from family pension.

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