Pension is retirement benefit. No need to mention that it is payable to any particular employee or to anyone dependent on him/her, depending on his/her past employment.
Pension received from a former employer is taxable as salary.Various deductions available on salary income, are also available to pensioners.
Types of pensions in india
Most of people like to get pension monthly. This periodic pension is known as uncommuted pension. One always needs to pay income tax on such pension.
Sometimes, recipients like to opt for the method of getting lumpsum amount than receiving it periodically. Such pension is known as commuted pension. In such pension, tax treatment varies as per the case.
For all Govt. Employees there, the pension is totally exempt from tax.
For other employees, there are further two cases:
- In case the gratuity is received, 33 percent of whatever normal pension is recipient is liable to receive, is exempt from tax.
- In case the gratuity is not received, one half of whatever normal pension the recipient is liable to receive, is exempt from tax.
Family pension is defined in Section 57 as a regular monthly amount payable by the employer to a person belonging to the family of an employee in the event of death. Pension and family pension are qualitatively different. The former is paid during the lifetime of the employee while the latter is paid on his/her death to surviving family members.
Senior Citizen and Very Senior Citizen
Under the Income Tax Act, a Senior Citizen is a person who at any time during the previous year has attained the age of 60 years or more and a Very Senior Citizen is a person who at any time during the previous year has attained the age of 80 years or more.
Benefits for Senior Citizen and Very Senior Citizen under the Income Tax Act.
The maximum amount of income not chargeable to tax in respect of Senior Citizens is Rs. 3.00 lacs and the maximum amount of income not chargeable to tax in respect of Very Senior Citizens is Rs. 5.00 lacs.
The 1 out of 6 criteria for filing of income tax return under proviso to Sec. 139(1) is not applicable in case of senior citizen.
The deduction available under section 80D for medical insurance premium paid is available up to Rs. 30,000 for senior citizens. This relief is in addition to the maximum relief of Rs. 1,50,000 available for investments under section 80C, 80CCC and 80CCD.
The deduction available u/s 80DDB in respect of expenditure incurred on treatment of specified diseases is available up to Rs. 60,000 for senior citizens.
Form no. ITR 1 can be used by pensioners to file their income tax returns. This form is used by majority of salaried taxpayers who own one house and have their income which is taxable) in addition to their pension.