Family pension to the widow of RETD amrmy officer

[Pramod Bhatia]

the widow of a RETD army officer has recently recd arrear of family pension amounting to Rs 4.50 lacs. The family pension is exempt from TDS and thus the bank has not deducted any tax. Being a god fearing citizen and wife of disciplined career officer she wants to be sure whether the income thus received as stated above is taxable and if so at what rate. she is getting monthly Family pension of Rs. 32000.00. It will be nice of u if clarification is provided through your office.

[Dr. Ashok Dhamija]

Since the lady is getting ₹ 32000 per month family pension, it amounts to about ₹ 4 lakh per year, which may be in the taxable bracket, subject to deductions, etc.

Receipt of arrears of family pension amounting to ₹ 4.50 lakh in a particular financial year will increase the tax liability for that year, and may also bring the income in the higher tax slab. However, to take care of it, she can take the advantage of the provisions of Section 89 of the Income Tax Act, which is reproduced below:

“89. Relief when salary, etc., is paid in arrears or in advance.—Where an assessee is in receipt of a sum in the nature of salary, being paid in arrears or in advance or is in receipt, in any one financial year, of salary for more than twelve months or a payment which under the provisions of clause (3) of Section 17 is a profit in lieu of salary, or is in receipt of a sum in the nature of family pension as defined in the Explanation to clause (ii–a) of Section 57, being paid in arrears, due to which his total income is assessed at a rate higher than that at which it would otherwise have been assessed, the Assessing Officer shall, on an application made to him in this behalf, grant such relief as may be prescribed: … …”.

The advantage of Section 89 is that relief can be granted when salary or family pension is received in arrears in one particular year. As per this, tax relief is provided by recalculating tax for both the years, i.e., the year in which arrears are received and the year to which the arrears pertain. The taxes are adjusted assuming arrears were received in the year in which they were due, even though they might have been received subsequently.

It is mandatory to file Form 10E if you want to claim relief under Section 89(1) for apportioning the arrears of family to the corresponding relevant years to which they pertain. Please consult some CA or other qualified person if you are not sure how to fill it. This Form should be available online.

     

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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.

[Pramod Bhatia]

Thanks Dr Dhamija for your reply. The contention is that as per section 192 the family pension is not treated as salary but is treated as income from other sources and the paying banker is not to deduct any TDS. It is mentioned that the assessee is allowed a standard deduction of 1/3rd of pension subject to a maximum of Rs 15000.00. But if the receipent is in receipt of such income which is more than exemption limit TDS should have been deducted or in the alternative should advise the family pensioner to calculate at his or end and deposit tax with the govt. There may be numerous such cases and would have skipped to pay the amount to national exchequer.

[Dr. Ashok Dhamija]

The issues mentioned by you have been covered in our earlier replies, available at the following links:

• Is Income Tax payable on Family Pension received by a widow
• Is TDS for income tax deducted on family pension?

Please read them.

Actually, payment of tax is the responsibility of the person receiving some income if it is beyond taxable limits. TDS is an anti-tax-evasion method or, may be, to ensure better tax compliance. But, the TDS is generally less than the actual tax incidence. In most situations, it is generally 10% TDS rate. Since, there is no legal provision for the TDS on family pension, the banks disbursing the family pension cannot deduct TDS since that would be an illegal act on their part. I agree with you that some people may be ignorant of about payment of tax at that end; but, then, this is the law. By the way, that ignorance of law is no excuse, is a well established legal principle.

     

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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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