Your Taxes

I receive pension under the Jeevan Suraksha policy of the Life Insurance Corporation of India.

The pension amount is included under taxable income.

I would like to know whether I am eligible to claim the standard deduction applicable to senior citizens in view of getting pension under the policy.

Ramanathan

Section 16(ia) of the Income Tax Act, 1961, provides for a deduction of a maximum of ₹40,000 from salary income. The said section was introduced by the Finance Act, 2018, and is applicable from FY 2018-19 onwards.

As per the provisions of the I-T Act, pension received by a taxpayer on account of his/her employment from a former employer is taxable under the head ‘Salaries’.

Accordingly, any taxpayer who receives pension from his/her former employer shall be entitled to claim a deduction of ₹40,000 or the amount of pension, whichever is less, under Section 16(ia) of the I-T Act.

However, since you have taken a private pension plan from LIC and it is not related to your former employment (if any), you shall not be eligible for claiming the benefit of the standard deduction.

My uncle passed away a year ago, and my aunt now receives family pension. Other than the family pension, she has only interest income.

Is the standard deduction of ₹40,000 applicable for family pensioners?

Vijayalekshmi S

Section 16(ia) of the Income Tax Act provides for a deduction of a maximum of ₹40,000 from salary income.

The said section was introduced by the Finance Act, 2018, and is applicable from FY 2018-19 onwards. As per the provisions of the I-T Act, pension received by a taxpayer on account of his/her employment from a former employer is taxable under the head ‘Salaries’.

Family pension received by a family member of a deceased employee is taxable as ‘Income from Other Sources’ and not as ‘Salary’. Thus, your aunt shall not be eligible to claim the standard deduction of ₹ 40,000 under Section 16(ia) of the I-T Act.

However, as per the provisions of Section 57(iia) of the Income Tax Act, a person receiving income in the nature of family pension can claim a deduction of a sum equal to one-third of such income or ₹15,000, whichever is less. Thus, your aunt shall be eligible to claim deduction under this section.

The writer is a practising chartered accountant. Send your queries to taxtalk@thehindu.co.in

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