MUMBAI: The Central Board of Direct Taxes (CBDT), in an official statement released on Thursday, clarified that individuals who receive
pension
from their former employers will be entitled to claim the
standard deduction
of Rs 40,000.
Pension received from a former employer is taxable under the head ‘Salary’. The Finance Act, 2018, has introduced standard deduction of Rs 40,000 which is to be allowed against salary income. Thus, taxpayers who receive pension from their former employers will be entitled to claim the standard deduction of Rs 40,000, the CBDT has clarified. If their pension is lower than this figure, then the deduction allowed will be limited to the actual pension received, it adds.
Finance Minister
Arun Jaitley had introduced the standard deduction in Budget 2018. This was in lieu of the medical reimbursement (Rs 15,000 per year) and transport allowance (Rs 1,600 per month). Thus, those in employment got a benefit of only Rs 5,800. However, allowability of standard deduction against pension income is a bonanza as pensioners do not receive medical reimbursement or transport allowance benefits.
Lubna Kably is a senior editor, who focuses on various policies a...
Read MoreLubna Kably is a senior editor, who focuses on various policies and legislation. In particular, she writes extensively on immigration and tax policies. The Indian diaspora is the largest in the world; through her articles she demystifies the immigration-policy related developments in select countries for outbound students, job aspirants and employees. She also analyses the impact of Income-tax and GST related developments for individuals and business entities.
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