- srikant83
- | Income Tax - Articles
- 03 Mar 2019
- 65,307 Views
- 15 comments
Pension Income and applicability of Standard deduction u/s 16(ia)
There are various types of Pensions that a person can receive, some of these are as below:
1. Annuity (uncommuted Pension) received from current employer
2. Annuity (uncommuted Pension) received from former employer
3. Family pension (i.e pension received after death of employee)
4. Annuity (uncommuted Pension) received from any person other than employer (like LIC Annuity)
We know that standard deduction for salaried employees u/s 16(ia) has been increased from Rs 40,000 (FY 2018-19) to Rs 50,000 (for FY 2019-20) through Finance Act 2019.
A common question arises whether aforesaid standard deduction can be claimed in respect of pension Income or not.
Argument against availing standard deduction u/s 16(ia)
In order to treat any income as Income from Salaries there has to be an employer-employee relationship. Pension received after retirement is based on the accumulated amount in the pension fund and on the date of receipt of such pension the employer- employee relationship cease to exist.
Hence many people treat this pension income as “Income from other sources” and if this is the case then standard deduction u/s 16(ia) will not be applicable as sec 16(ia) deduction will only be applicable when there is “Income from Salaries”.
Argument in favour of availing standard deduction u/s 16(ia)
U/s 17(1) salary includes:
1. …….
2. Any annuity or pension
3. ……
Hence periodical pension received from current or past employer is taxable as Income from Salaries.
Hence standard deduction u/s 16(ia) is well applicable for periodical (uncommuted) pension received from current or past employer. (The same has been confirmed by CBDT press release dated 05.04.2018 which is reproduced below.)
However family pension (i.e pension received by family member after death of employee) is taxable under the head “Income from Other Sources” (Deduction of 1/3rd of pension amount or Rs 15,000 P.A whichever is lower is applicable u/s 57(iia)
Beside it annuity (also called pension) received from a person other than employer (like LIC Annuity) is taxable under the head “Income from Other Sources” and standard deduction u/s 16(ia) is not applicable on such Income.
The above provisions can be summarized below:
| S.N | Type of Income | Head of Income | Applicability of Deduction |
| 1 | Annuity (uncommuted Pension) received from current employer | Income from Salaries | Yes, u/s 16(ia) Rs 40,000 P.A (FY 18-19) and Rs 50,000 P.A (FY 19-20) |
| 2 | Annuity (uncommuted Pension) received from former employer | Income from Salaries | Yes, u/s 16(ia) Rs 40,000 P.A (FY 18-19) and Rs 50,000 P.A (FY 19-20) |
| 3 | Family pension (i.e pension received after death of employee) | Income from Other Sources | Yes, u/s 57(iia) i.e 1/3rd of pension amount or Rs 15,000 P.A whichever is lower |
| 4 | Annuity (uncommuted Pension) received from any person other than employer (like LIC Annuity) | Income from Other Sources | No |
Press release dated 05.04.2018 can be accessed at the following link-
Author Bio
My Published Posts
More Under Income Tax
15 Comments
Leave a Comment
Latest Posts
- Register for online Crash course on GST & Income Tax- Last Chance
- Physical Submission of Audit Report in Form 704 for FY 2018-19
- SEBI (Depositories And Participants) (Amendment) Regulations, 2020
- Section 272B Penalty for failure to comply with provisions of PAN
- Official amendments to Direct Tax Vivad se Vishwas Bill 2020
- Kolkata high court stays service tax audit
- Interest on FD received at pre-operative stage is capital receipt
- Format of Draft reply against Section 50(1) GST Interest demand
- Tax Audit Applicability – After Budget 2020
- TCS on Foreign Travel, Tours Packages, Remittance
- ITAT extends Stay Period for Google India for 6 months
Popular Posts
- Register for online Crash course on GST & Income Tax- Last Chance
- Book on ‘Complete Analysis of GST’
- How to open password protected files of Income Tax and TDS
- Empanelment of CA firm for concurrent audit of Andhra Bank
- Tax Audit Applicability: FY 2020-21
- Practical issues in Presumptive Taxation – 44AD, 44ADA & 44AE
- House Property Remained Vacant – Check Out How to Calculate Your Income Tax Liability
- Tax Benefit on Home Loan
- TCS Rate Chart for AY 2020-21 and AY 2021-22
- Income Tax Rates for AY 2020-21 (FY 2019-20)
Featured Posts
- File E-TDS Return online- Now no need to visit Facilitation Centre
- House Rent Allowance – Income Tax provisions
- Register for online Crash course on GST & Income Tax- Last Chance
- Book on ‘Complete Analysis of GST’
- TDS implication on purchase of property from NRI
- HRA Taxability & Section 80GG Deduction on Rent Paid
- Income Tax Rates for AY 2020-21 (FY 2019-20)
- House Property Remained Vacant – Check Out How to Calculate Your Income Tax Liability
- TCS Rate Chart for AY 2020-21 and AY 2021-22
- Practical issues in Presumptive Taxation – 44AD, 44ADA & 44AE
As per sec 17(1) of IT act, any annuity or pension is considered as salary. Under PMVVY by LIC, annuity pension is received for the amount kept with them for 10 years. Hence, it is felt that this pension to be taken as Salary and standard deduction is allowed
whether standard deduction available to pensioner and if available how much
Consider pensioner as salaried person for this purpose
Please clarify if Pension from EPF(Family Pension)
of Rs.2095 received every month is taxable.
I am serving in a bank and receiving pension as an ex serviceman.Can i claim standard deduction of 40000 on both salary and pension as it is declared now that pensioners can avail 40000 deduction..
I am serving in a bank and receiving pension as an ex serviceman.Can i claim standard deduction of 40000 on both salary and pension as it is declared now that pensioners can avail 40000 deduction>>>
Standard deduction should be calculated on combined Income.
Can a pensioner can claim Standard Deduction from both Pension (Rs. 40000) and Family Pension (Rs. 15000). Person is getting pension central government and family pension due to death of spouse from central government.
Family pension (i.e pension received after death of employee) is taxable under the head Income from other sources for which maximum deduction of Rs 15,000 is provided u/s 57.
For pension received from employment is taxable under the head income from salaries for which deduction of Rs 40,000 (FY 18-19) is provided u/s 16.
Hence if a person is in receipt of both the pension then he can claim both deduction u/s 16 and 57.
I am a retired bank employee and receive monthly pension. At the time of superannuation in 2015 I commuted my pension. Also I receive fund from LIC every quarter under the scheme Jeevan Suraksha after commutation of pension. Whether I am eligible for claiming standard deduction u/s 16(ia)
You can claim standard deduction for uncommuted (if any) part of the pension.
For LIC pension no standard deduction is available.
i am pensioner of lic.sold some equity shares purchased in 1997, sold in feb 2019 proceeds 50000.longterm capital gain abt 15000.pl confirm if these are exempt from itax.advise itr form and COLUMN where to be shown or not to be shown
Can retired persons receiving pension under EPS95 and pension from Super Annuation FUND created by companies through LIC claim the rebate?
I am a sr citizen earning pension. how much standard deduction i am supposed to get for assesment year 2019-20?
Pension given by LIC under PM Sr Citizens deposit is taxable.