Is There Any Standard Deduction Available In Case Of Pension Income

Please advise the IT section no. under which standard deduction from the Pension income is applicable & what is the limit.Also advise, whether the standard deduction is applicable for Pension / Annuity received under LIC Superannuation Scheme. Shirish S. Gandhi ,Anand ,Gujarat

Your question has two limbs -one regarding pension received from employer and other pension or annuity received under LIC Superannuation Scheme.

Pension from employer

Pension received from employer is charged to tax as “salary” . However, the standard deduction previously allowed from salary u/s 16(1) was deleted from the I T Act from FY 2005-06 i.eAsst Yr 2006-07. So , there is no provision of standard deduction from salary income (or pension) from 1/4/2005 onwards.

Pension or Annuity Under LIC policy.

Section 80CCC deals with the pension or annuity scheme of LIC or other insurer. The said sub-section 1 of section 80CCC provides for allowance of deduction of amount deposited in such scheme and sub-section 2 of section 80CCC provides for taxation of amount received either as a result of surrender or pension . The said sub section 2 is as under :

(2) Where any amount standing to the credit of the assessee in a fund, referred to in sub-section (1) in respect of which a deduction has been allowed under sub-section (1), together with the interest or bonus accrued or credited to the assessees account, if any, is received by the assessee or his nominee
(a) on account of the surrender of the annuity plan whether in whole or in part, in any previous year, or
(b) as pension received from the annuity plan,an amount equal to the whole of the amount referred to in clause (a) or clause (b) shall be deemed to be the income of the assessee or his nominee, as the case may be, in that previous year in which such withdrawal is made or, as the case may be, pension is received, and shall accordingly be chargeable to tax as income of that previous year.

In simple words, section 80CCC provides that the pension received from such annuity plan under superannuation scheme of LIC or any other insurer will be taxable. The said amount shall be taxable under the head “income from other sources” being the residual head under the I T Act . There is no express deduction available against such income and the deposit for such scheme was already availed of deduction .

So, there is no deduction available from pension income?

Not exactly. Family pension received by the family members of the deceased employee is charged to tax under section 56 of the I T Act as income from other source. However, under section 57(iia) standard deduction is available to the extent of 33.33 % or RS 15000 whichever is more. The said provision is as under:

(iia) in the case of income in the nature of family pension, a deduction of a sum equal to thirty-three and one-third per cent of such income or fifteen thousand

Courtesy- www.taxworry.com