I have heard that there is some standard deduction permitted under Income Tax law for the family pension. But nobody tells me for sure. My mother has started getting family pension about 9 months back and I have to get her Income Tax Return prepared. The accountant whom I contacted knows about business income but not about family pension income. Please advise me how much deduction is permitted for family pension income. If no such deduction is permitted then also please guide me.
Family pension is taxed under Section 56(1) of the Income Tax Act. This section provides that “Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income tax under the head “Income from other sources”, if it is not chargeable to income tax under any of the heads specified in Section 14, Items A to E”. Now, since “family pension” is not included in any of these heads specified in Section 14, Items A to E, therefore, “family pension” is taxed under Section 56 as “Income from Other Sources”.
In view of the provisions of Section 57(iia) of the Income Tax Act, in respect of income due to “family pension”, a deduction of a sum equal to thirty-three and one-third per cent of such income (i.e., one-third of such income) or Rs. 15000, whichever is less, is allowed from such income.
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