Whether TDS for income tax can be deducted on 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, 2 months ago.

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  • #2008

    Anonymous
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    Is it permissible to deduct TDS on pension paid to a senior citizen? What are the rules in this regard?

  • #2048

    Yes, TDS is required to be deducted on payment of pension. Let me first point out that this answer is for deduction of TDS (Tax Deduction at Source) for “pension” and NOT for “family pension”, since they are treated differently under the Income Tax Act, 1961. The income tax treatment for “pension” and “family pension” is different.

    “Pension” is generally a periodical allowance or stipend granted on account of past service. Pension is a compensation for past service. It owes its origin to a past employer-employee or master-servant relationship. It is paid on the basis of earlier relationship of an agreement of service as opposed to an agreement for service. This relationship ends only on the death of the employee.

    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.

    Now, Section 192 of the Income Tax Act provides for deduction of TDS for payment of salary. Since pension is also salary, as mentioned above, therefore, TDS is required to be deducted on payment of pension in accordance with Section 192 of the Income Tax Act.

         


    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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