Pensioners can avail standard deduction of Rs 40,000

The Central Board of Direct Taxes (CBDT) on Thursday clarified that any taxpayer, who receives pension from his former employer, can claim standard deduction of Rs 40,000 or the amount of pension, whichever is less.
Pension received by a taxpayer is taxable under the head 'Salaries'. Sec 16 of the IT Act, 1961 has now been amended by the Finance Act 2018 to provide a taxpayer having income chargeable under the head 'Salaries' to be allowed a deduction of Rs 40,000, or the amount of salary, whichever is less, for computing his taxable income.
The CBDT said it had received representations seeking clarification as to whether a taxpayer, who receives pension from his former employer, shall also be eligible to claim this deduction. Hence, this clarification has been issued.
This deduction is allowed in lieu of the hitherto exemption in respect of transport allowance and reimbursement of miscellaneous medical expenses. Consequently the present exemption in respect of these two allowances stands withdrawn from FY18-19. However, in case of differently-abled persons, the transport allowance at enhanced rate shall continue to be available.
Earlier pensioners were not able to enjoy any allowance on account of transport and medical expenses, but after this provision they will also get the benefit of this deduction, an official said.
However, in case an employee passes away, then after his death the pension is received by his family members. Pension received by dependent family members of the retired individual is known as family pension and is considered as 'income from other sources'.
"For family pension, a standard deduction u/s 57(iia) is available under which an amount of Rs 15,000 or 1/3rd of the uncommuted pension received, whichever is less, shall be exempt. Spouse, children below the age of 25 years, unmarried daughter and dependent parents in certain cases shall come under the definition of dependent family members," a tax expert said.

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