Income Tax: Can I claim standard deduction on pension received by me?

An employee is entitled to claim standard deduction, subject to a maximum of Rs. 50,000/- in a financial year, against any income which is taxable under the head “Salaries” standard deduction Available against arrears or advance or salary received for the current period. Apart from the salary received from the present and former employer, pension received from the former employer also becomes taxable under the head Salary. So a retired person is entitled to claim standard deduction against pension income from previous employers.

For pension which is received by an individual on the basis of his employment, it becomes taxable under the head “Salaries” and entitles the recipient to claim standard deduction. It can be pension from ex-employer or pension from Employees Provident Fund Office (EPFO) office. As well as an annuity from an insurance company, in respect of an annuity purchased by an employer for retirement. Please note that any periodic payments received as pension, on annuity purchased by you directly from an insurance company becomes taxable under the head “Income from other sources” and hence are not eligible for standard deduction. Annuity earned by your wife is taxable under the head “Income from other sources”, so your wife is not entitled to standard deduction.

Balwant Jain is a Tax and Investment Specialist and can be contacted here jainbalwant@gmail.com and @jainbalwant on Twitter