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.
Please send notifications of standard deduction for person with disabilities.