Ministry of Finance

Clarification regarding applicability of standard deduction to pension received from the former employer

Posted On: 05 APR 2018 1:55PM by PIB Delhi

The Central Board of Direct Taxes (CBDT) has clarified that the pension received by a taxpayer from his former employer is taxable under the head “Salaries”. The Finance Act, 2018 has amended Section 16 of the Income–tax Act, 1961 (“the Act”) to provide that a taxpayer having income chargeable under the head “Salaries” shall be allowed a deduction of Rs 40,000/- or the amount of salary, whichever is less, for computing his taxable income. Accordingly, any taxpayer who is in receipt of pension from his former employer shall be entitled to claim a deduction of Rs 40,000/- or the amount of pension, whichever is less, under Section 16 of the Act.

Earlier, the representations were received seeking clarification as to whether a taxpayer, who receives pension from his former employer, shall also be eligible to claim this deduction.

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One Comment

  1. Chandrasekaran says:

    Sir,I was employed with a private firm at Bangalore.I get Pension under EPF,1975 thro PF office monthly. (Rs.8760/-p.a)
    I also get Super annuation gratuity thro LIC of India monthly. (Rs 36120/-p.a) This total of Rs 44880 has
    been shown under”Income from Salaries” and ITO
    has been clearing my returns.
    Now under the new rules, can I claim Standard deduction ? Please clarify. I am 73 yrs old.

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