EPS pension query: Are pensioners denied ₹75,000 standard deduction under New Tax Regime?

The EPS pension gets taxed under the head "Income from Salary". Thus, it is eligible for the ₹75,000 standard deduction on salary income available under the new tax regime. However, there seems to be a misconception among some pensioners that the EPS pension is treated as "income from other sources" and does not qualify for the ₹75,000 standard deduction. Today's Q&A clarifies this misconception in response to a reader's query.

Answer: For an income to become taxable under the head "Salary", it is necessary that there is or has been a relationship of employee and employer. Since the pension is received by the ex-employee from his ex-employer for the services rendered by him in the past, the same, rightly, gets taxed under the salaries head.

Even the pension, which has a connection with the services rendered in the past, also gets taxed under the salaries head.

For example, an annuity received by an employee from an insurance company in respect of a superannuation corpus bought by the employer gets taxed as salary, as this has a connection with the past services rendered.

By the same logic, the pension received from EPFO (Employee Provident Fund Office) under EPS (Employee Pension Scheme) needs to be taxed under the salaries head and not under “Income from other sources” head stated by you.

The family pension is received by a family member or dependent due to their relationship with the deceased and not for any relationship of employment, and, therefore, rightly gets taxed under the head “Income from other sources”. The recipient can claim a deduction of a lower of 1/3rd of the pension or ₹25,000, if you opt for the new tax regime. Deduction available under the old tax regime is 1/3 of the pension, subject to a maximum of ₹15,000.

In my opinion, there is no inconsistency or irrationality in the taxation of all these pensions.