Taxpayers who receive a pension from their former employers are eligible to claim a standard deduction of Rs 40,000, Income Tax department said today.

Keeping income tax rates and slabs unchanged, Budget 2018-19 introduced Rs 40,000 standard deduction for salaried employees and pensioners in lieu of the exemption in respect of transport and medical expenses that was given till last financial year (2017-18).

The Central Board of Direct Taxes (CBDT) said it had received representations as to whether a taxpayer, who receives a pension from his former employer, shall also be eligible to claim this deduction.

"The pension received by a taxpayer from his former employer is taxable under the head 'salaries'. Accordingly, any taxpayer who is in receipt of a 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 (I-T) Act," CBDT said in a statement.

The standard deduction was discontinued from the assessment year 2006-07 but was re-introduced in 2018-19 Budget.

In 2017-18, no tax was applicable on Rs 19,200 of transport allowance and medical expenditure of up to Rs 15,000. This has now been subsumed into the new standard deduction of Rs 40,000.