The Finance Act, 2018 has amended Section 16 of the Income–tax Act, 1961 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.
Representations have been received seeking clarification as to whether a taxpayer, who receives pension from his former employer, shall also be eligible to claim this deduction.
The pension received by a taxpayer from his former employer is taxable under the head “Salaries”. 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 Income–tax Act, 1961.
[Press Release dated April 5, 2018]
URL: https://www.incometaxindia.gov.in/Lists/Press%20Releases/Attachments/701/Press-Release-Clarification-regarding-applicability-standard-deduction-pension-received-former-employer-5-4-2018.pdf