Standard Deduction Applicable for Pensioners – Clarification
Ministry of Finance
Clarification regarding applicability of standard deduction to pension received from the former employer
The Central Board of Direct Taxes (CBDT) has clarified that the pension received by a taxpayer from his former employer is taxable under the head “Salaries”. The Finance Act, 2018 has amended Section 16 of the Income–tax Act, 1961(“the Act”) to provide that a taxpayer having income chargeable under the head “Salaries” shall be allowed a deduction of Rs 40,000/- or the amount of salary, whichever is less, for computing his taxable income. Accordingly, any taxpayer who is in receipt of 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 Act.
Earlier, the representations were received seeking clarification as to whether a taxpayer, who receives pension from his former employer, shall also be eligible to claim this deduction.
Source: PIB News
Due to continuous fall of interest the portion of commuted pension would be revived only after 5 years. This will be benefitted to all pensioners.
Thanks to the board who has taken this decision. The expense is more to the senior citizen pensioners, due to the health problems. especially those who are not come under the premises of CGHS coverage.
Very good decision.