The “family pension” is taxed under Section 56 of the Income Tax Act as “Income from Other Sources”. But, it is pertinent to mention that 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. The family pension of a widow of a defence forces personnel is also taxable in the same manner.
For example, if a widow receives a family pension of Rs. 25,000 per month, then the total family pension in the year would be Rs. 3 lakh in a year. One third of this amount is Rs. 1 lakh. So, she can claim exemption of Rs. 15,000, which is lower than Rs. 1 lakh. The remaining amount of Rs. 2.85 lakh (i.e., after excluding this amount of Rs. 15000 from Rs. 3 lakh) becomes taxable in her hand, as “income from other sources”, and it is taxed according to the tax slab applicable to her. Of course, if she has any other income from sources such as business, profession, salary, etc., that will also be added to this and the total income will be taxed as per the applicable slab.
Please also read the following article on similar issue: Is Income Tax payable on Family Pension received by a widow?
I may further point out that under Section 10(18)(ii) of the Income Tax Act, any income by way of family pension received by any member of the family of an individual who has been in the service of the Central Government or State Government and has been awarded “Param Vir Chakra” or “Maha Vir Chakra” or “Vir Chakra” or such other gallantry award as the Central Government may, by notification in the Official Gazette, is completely exempted from Income Tax. As per the Notifications issued by the Central Government, family pension in respect of recipients of the following medals (when received for acts of gallantry, etc.) is completely exempt under this provision: Ashok Chakra, Kirti Chakra, Shaurya Chakra, Sarvottam Jeevan Raksha Padak, Uttam Jeevan Raksha Medal, Jeevan Raksha Padak, President’s Police Medal for Gallantry, Police Medal for Gallantry, Sena Medal, Nao Sena Medal, Vayu Sena Medal, Fire Services Medal for Gallantry, President’s Police and Fire Services Medal for Gallantry, President’s Fire Services Medal for Gallantry, President’s Home Guards and Civil Defence Medal for Gallantry, Home Guards and Civil Defence Medal for Gallantry.
Likewise, I may also point out that family pension received by the widow or children or nominated heirs, as the case may be, of a member of the armed forces (including para-military forces) of the Union, where the death of such member has occurred in the course of operational duties, in such circumstances and subject to such conditions, as may be prescribed, is also completely exempted from Income Tax.
Other than the above two exempted categories, the family pension is taxable as an “income from other sources”, as explained above. The family pension of a widow of a defence forces personnel is also taxable in the same manner.
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. List of his YouTube Videos.
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