Is TDS for income tax deducted on family pension?

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This topic contains 1 reply, has 2 voices, and was last updated by Dr. Ashok Dhamija Dr. Ashok Dhamija 1 year, 1 month ago.

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  • #1616

    Anonymous
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    What is the legal position in the Income Tax Act for the deduction of TDS, i.e., tax deduction at source, for the family pension which is paid to the family members (such as widow or children of the deceased employee / pensioner)? Can TDS be deducted on the family pension?

  • #1640

    Firstly, let me point out that there is difference between “pension” and “family pension” for the purposes of Income Tax Act, 1961. The income tax treatment for “pension” and “family pension” is different.

    It is pertinent to point out that “pension” received from a former employer is taxable under the head “salary” since Section 17 of Income Tax Act specifically lays down in clause (ii) of sub-section (1) that “any annuity or pension” is included in “salary”. Therefore, “pension” is taxed in the same way as “salary” is taxed.

    On the other hand, “family pension” is taxed under Section 56 as “Income from Other Sources”.

    Now, Section 192 of the Income Tax Act makes any income chargeable under the head “salary” subject to tax deduction at source (TDS). Since pension is also considered as salary, therefore TDS is to be deducted on pension also, wherever applicable as per the prevailing rates.

    On the other hand, family pension is not “salary” but an “income from other sources”. Therefore, TDS cannot be deducted for family pension under Section 192. Moreover, there is no other section in the Income Tax Act which makes it mandatory to deduct TDS on family pension. Therefore, there is no TDS deduction on family pension.

    Thus, the answer to your question is that TDS cannot be deducted on payment of family pension.

         


    Dr. Ashok Dhamija is a New Delhi based Supreme Court Advocate and author of law books. Read more about him by clicking here. List of his Forum Replies. List of his other articles. List of his Quora Answers.

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