No standard deduction on family pension

SC Vasudeva

Q. Please clarify on the following points:

i) Whether Rs 40,000 allowed as standard deduction for employees and pensioners also applicable for family pensioners?

ii) If yes? Whether an employee who is also drawing family pension will be eligible for standard deduction separately for salary and family pension i.e. Rs 80,000? — Suresh Chand Goyal

A. A deduction of Rs 40,000 would be allowable against the income which is taxable under the head “Salaries”. The family pension is normally received after the death of an employee.  Deduction of Rs 40,000 would not be allowable in respect of family pension of such a nature as such income is taxable under the head “Income from other sources”.

Q. I retired from a non-government limited company in March 2018. I will get following payments in the financial year 2018-19:

i) Pension of Rs 23,328 from EPFO under Employees Pension Scheme 1995 ii) Annuity of Rs 49,284 under pension plan - Jeevan Suraksha from LIC iii) Annuity of Rs 93,624 from LIC under Company Executive Group Superannuation Scheme taken by my company from LIC. My queries are as follows:

a) Whether all the above payments received are to be shown under the head “Salaries” in my income tax return or under which head?

b) Whether I am entitled to get a Standard Deduction of Rs 40,000 or any other amount? Please clarify. — Rakesh Mahajan

A. (a) Pension received by a person from a recognised provident fund  is not taxable provided an employee has served for a period of 10 years in service and pension has been received after completing 58 years of age. Therefore, in case you comply with these requirements, pension received by you would not be taxable.

(b) Annuity under pension plan Jeevan Suraksha from LIC is taxable.

(c) Annuity from LIC under group superannuation scheme would be exempt from tax provided the payment has been received from an approved superannuation fund which is made:

(i) on the death of a beneficiary; or

(ii) to an employee in lieu of or in commutation of an annuity on his retirement at or after a specified age or on his becoming incapacitated prior to such retirement; or

(iii) by way of refund of contributions on the death of a beneficiary; or

(iv) by way of refund of contributions to an employee on his leaving the service in connection with which the fund is established otherwise than by retirement at or after a specified age or on his becoming incapacitated prior to such retirement, to the  extent to which such payment does not exceed the contributions made prior to the commencement of this Act and any interest thereon; or

(v) by way of transfer to the account of the employee under a pension scheme referred to in Section 80CCD of the Income-tax Act 1961 (The Act) and notified by the Central Government.

Therefore, payment from the superannuation fund received by you would not be taxable if you satisfy any one of the above requirements.

(d) The amount received by you as taxable annuity will have to be shown under head “Income from other sources”.

(e) Standard Deduction of Rs 40,000 would be allowable against the salary income. In case any of the above amounts or any other amount received by you is taxable under the head “Income from salary”, a deduction to the extent of Rs 40,000 would be allowable.