CBDT Clarification on Applicability of Standard Deduction against Pension from Previous Employer

CBDT Clarification on Applicability of Standard Deduction in the case of Pension from Previous Employer

CBDT has clarified that any taxpayer who is in receipt of pension from his former employer, shall be entitled to claim a standard deduction of Rs 40,000/- or the amount of pension, whichever is less, from Salary Income under Section 16 of the Act, as under:

CBDT Press Release dt. 5 Apr. 2018

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.

Earlier, the representations were received seeking clarification as to whether a taxpayer, who receives pension from his former employer, shall also be eligible to claim this deduction.

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