The time has come to file income tax return, hence pensioners and people receiving family pension must know before filing income tax return that the rules of income tax on income from pension and family pension are different. Let us tell you that many times many people consider the income tax rules on pension and family pension income to be the same, due to which they face difficulties in calculating tax, getting notices and refunds.
Pension is considered salary
Under the Income Tax Act, the pension received after retirement is considered as salary. The reason for this is that it is given to the employee by the former employer and it is related to the employee-employer relationship. Therefore, pension income is taxed under “Income from Salary”.
Pensioners also get the benefit of standard deduction. Standard deduction of up to Rs 50,000 in the old tax system and Rs 75,000 in the new tax system can be taken, provided the amount of salary or pension is not less than this.
Separate rules on family pension
The family pension received by an employee or pensioner’s spouse or legal heir after his death is not considered as salary. It is kept under “Income from other sources”.
Because of this, family pension recipients do not get the benefit of standard deduction. However, special deduction is available under section 57(iia) of the Income Tax Act. In the old tax system, one-third of the family pension or Rs 15,000 can be taken as deduction and in the new tax system, one-third of the amount or Rs 25,000, whichever is less, can be taken as deduction.
Relief from advance tax to senior citizens
Under Section 207(2) of the Income Tax Act, resident senior citizens aged 60 years or above are exempted from paying advance tax if their income does not include income from business or profession. However, they will have to pay the tax due at the time of filing ITR.
Special facility for those above 75 years of age
Under Section 194P, some senior citizens aged 75 years or above may also be exempted from filing ITR. For this, their income should be limited only to pension and interest on deposits in the same bank and they will have to submit Form 12BBA in the bank.
Experts say that before filing ITR for AY 2026-27, pensioners must match the information of Form 16, AIS and Form 26AS. Unnecessary tax disputes and notices can be avoided by showing income in the correct heads.
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