Deduction up to Rs 15,000 allowed on family pension

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Q. I am a widow and a Central Government pensioner. I am drawing family pension of my husband.  I have one dependent, disabled and unmarried daughter (32). A disability certificate (69%) has already been issued to her. She is availing of medical benefits under the Central Government Health Scheme. I am also availing of Rs 75,000 tax deduction. Can I invest some money (in FD) in my daughter’s name?  If so, will the interest earned on the FD be clubbed with my income? What is the limit of standard deduction as regards family pension?   - Kirpal Kaur

(a) You can gift any amount to your major daughter who is suffering from a disability. The gift so made will have no tax liability in your hands as well as in her hands.  The gifted amount can be deposited in a fixed deposit account in her name.  The interest accruing on such FD would be treated as her income and will not be clubbed with your income.

(b) Standard deduction in respect of family pension has not been increased. At present, the deduction stands at Rs 15,000 or 1/3 of the amount received whichever is less.

Q.  I, super senior citizen, am a defence pensioner. Here are my income details:

• Total pension         Rs 6,70,653      (April 1,2017, to March 31, 2018)
• Interest on savings account Rs 20,379
• Re-imbursement of medical bill    (eye surgery at PGI)        Rs 32,873        

My case was referred by the Ex-servicemen Contributory Health Scheme, Ambala Cantt. I am not drawing medical allowance and am entitled to free treatment from ECHS or Military Hospital (MH).  The operation was conducted at the PGI as these facilities are not available at the MH. What will be my tax liability? Rs 37,469 tax has already been deducted from my pension for the financial year 2017-18.   - Surjit Singh

No tax is liable on the medical expenses reimbursed to you by the Ex-servicemen Contributory Health Scheme, Ambala Cantt.  Presuming that the amount of interest of Rs 20,379 includes interest to the extent of Rs 10,000 on savings bank account, a deduction of Rs 10,000 for assessment year 2018-19 (financial year 2017-18) would be allowable from the total income. The total income after allowing such deduction would work out at Rs 6,81,032.  Tax liability for the said assessment year would be Rs 37,292.  You would, thus, be entitled to a refund of Rs 177 as tax of Rs 37,469 has already been deducted from your pension income.

Q. I, a family pensioner, have earned LIC renewal commission (TDS deducted) as a former LIC agent. My other sources of income are LIC annuity per month, interest on FDRs and savings, and family pension. What is the tax treatment of family pension? What deductions are applicable to it?

It was explained in the reply published on August 6, 2018, that deduction of Rs 40,000 is admissible for the assessment year 2019-20 and the same is to be reflected under the head “Income from Salary” as deduction permissible under Section 16(ia) of the Income Tax Act, 1961.  The family pension is normally received by the family of a deceased who was a salaried employee.  Such an income is taxable under Section 56 of the Act (i.e. income from other sources).  The term “family pension” is defined by Section 57 of the Act, which means a regular monthly amount payable by the employer to a person belonging to the family of employee in the event of his death.  Deduction of Rs 40,000 is not permissible under Section 56 of the Act.  As against this, 1/3 of the family pension or Rs 15,000 whichever is lower is allowed as deduction from the family pension.

Your income such as LIC commission and annuity and bank interests is taxable under head “Income from other sources”.  Pension received by an employee on his retirement or termination of his employment is taxable under head “Salary” from which deduction of Rs 40,000 would be admissible for the assessment year 2019-20 and onwards.

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