Taxability of Pension received
is taxable on the basis of its source. There are two main sources of
- from employer and
- family pension
- Pension received is taxable
in both the cases but the rules for taxability are different.
received from Employer:
is received from employer
in terms of agreement of services. This is to ensure some source of
after retirement to employees and is considered a part of Social
Corpus / Fund for payment of pension are generally
during the tenure of the service of the employee from a contribution by
employee or employer or a combination of employee and employer
Employees have an
option to commute some part of their pension at the time of their
Taxability of Commutation of Pension is dealt by Section 10(10A) of the
- Full commutation amount received by Government
Employees as per Civil Pensions (Commutation) Rules are exempt.
- In other
cases following amount received towards commutation of pension is
case where employee receives gratuity, one
third value of total entitled pension amount.
case where employee does not receive gratuity,
one half of the pension which employee is entitled for.
periodic pension received from Employer is
taxable as Income from Salary. TDS is deducted at
from pension payment as applicable in case of salary payment and Form
Certificate) is issued for the same.
There is no
option to avoid TDS from
pension even by submitting any form like Form 15G/15H. This option is
available only in case of interest income (Form
Taxability of Family Pension
Pension is received by the
family of the employee after the death of the employee. Since, there is
employer – employee relation between recipient of pension and employer,
Pension is treated as Income from Other Sources.
deduction equivalent to
1/3rd pension amount subject to maximum of ₹15000/- is available
under Section 57 of the Income Tax Act.
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Submit Form 15G/H to avoid TDS
Read in detail about the Old & New Tax Regimes and decide about which tax regime you should opt for?
Pension - the Retirement Benefit - How charged to Tax?
Bank Interest exempt upto ₹50,000 for senior citizens u/s 80TTB
Tax relief of Section 89
Check your nominations in SBI Bank
Nominations in ICICI Bank