The standard deduction doesn't apply to this pension under income from other sources

Pension received by a retired employee is taxed under the head “Salaries”, while family pension received by legal heirs after the employee’s death is taxed under “Income from Other Sources”. This classification directly impacts the deductions available.

Standard deduction applies only in salary cases

Standard deduction is available only when the pension is taxed under “Salaries”. It is a flat deduction provided automatically.

• ₹50,000 under old tax regime.

• ₹75,000 under new tax regime.

This is why retired employees receiving a pension get the benefit, while family pension recipients do not.

Tax treatment of pension

A commuted pension is a lump-sum amount received by giving up a part of monthly pension.

It is calculated as: Age factor × Commutation % × 12 × Basic Pay

Although it is income, it is exempt under section 10(10A) within prescribed limits.

Exemption rules

• If gratuity received, then one-third amount is exempt.

• If no gratuity is received then 50% exempt Balance is taxable as salary.

Family pension

Family pension received by legal heirs after the employee’s death is taxed under “Income from Other Sources”.

Lower of one-third of pension or ₹15,000 ₹25,000 under new tax regime

Relief under section 89

Relief under section 89 can be claimed in respect of the commuted value of pension or arrears of pension received in lump sum, subject to the furnishing of Form No. 10E.

The standard deduction is not available on family pension because of how it is classified under income tax rules. In India, the benefit of standard deduction is linked only to income taxed under the head “Salaries”. Since family pension is not treated as salary, it does not qualify for this deduction.