Standard Deduction Of Rs 40,000 Available For Pensioners. Details Here

Pensioners are eligible for standard deduction up to Rs 40,000 from their taxable income, the government clarified on Thursday. Earlier, Budget 2018 had amended the Finance Act and provided a standard deduction of Rs 40,000 to all salaried individuals in their taxable income. However, there was some confusion as to whether pensioners too are eligible to claim this standard deduction, said an official statement. In response, the Income Tax (IT) department clarified that pension qualifies as salary and is thus eligible for standard deduction of up to Rs 40,000, according to an official statement from Central Board of Direct Taxes (CBDT).

"The Central Board of Direct Taxes (CBDT) has clarified that the pension received by a taxpayer from his former employer is taxable under the head "Salaries". The Finance Act, 2018 has amended Section 16 of the Income-tax Act, 1961("the Act") to provide that a taxpayer having income chargeable under the head "Salaries" shall be allowed a deduction of Rs 40,000/- or the amount of salary, whichever is less, for computing his taxable income. Accordingly, any taxpayer who is in receipt of pension from his former employer shall be entitled to claim a deduction of Rs 40,000/- or the amount of pension, whichever is less, under Section 16 of the Act," said the press release.
 

CBDT issues clarification regarding applicability of standard deduction to pension received from former employer.

— Income Tax India (@IncomeTaxIndia) April 5, 2018

 

As per the amended Section 16 of the Income–tax Act, 1961, a taxpayer having income chargeable under the head “Salaries” shall be allowed a deduction of Rs 40,000/- or the amount of salary, whichever is less, for computing his taxable income.

— Income Tax India (@IncomeTaxIndia) April 5, 2018

 

It is clarified that a taxpayer who is in receipt of pension from his former employer shall be entitled to claim a deduction of Rs 40,000/- or the amount of pension, whichever is less, under Section 16 of the Act.

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— Income Tax India (@IncomeTaxIndia) April 5, 2018

This additional deduction of Rs 40,000 was proposed in Budget 2018 in place of the former deductions of Rs 19,200 for transport allowance and Rs 15,000 for medical reimbursement. The move is expected to benefit 2.5 crore salaried employees.

(Also Read: 10 Key Changes In Income Tax Rules That Came Into Effect From April 1)

Earlier, standard deduction available for salaried individuals until it was abolished with effect from assessment year 2006-07.

The benefits arising from standard deduction depend on the tax bracket of a particular salaried individual.  

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