EXEMPTION FROM PAYMENT OF INCOME TAX TO PENSIONERS WHO HAVE ATTAINED AGE OF 80 YEARS OR MORE
Pension or Family Pension taxed as salary income?
Yes, Pension is taxable as salary income. And Family Pension is taxable as income from other sources.
National Council Staff Side members raised a point in the NC JCM meeting was held on 13th April, 2019 regarding exemption from payment of income tax to Pensioners who have attained age of 80 years or more.
Staff Side stated that at present very old pensioners are exempted, if their income is up to Rs 5 lakh per annum whereas the govt. have granted additional pension @20% of their basic pensioner on attainment of 80 years of age 30%, .on 85 years 40%, on 90 years to 100% on attaining 100 years of age, the fixation of ceiling of Rs. 5 lakh for exemption from income tax would act to reduce their pension income which will affect them adversely.
Staff Side therefore suggested that exemption from income tax to very senior pensioners aged 80 years or above be considered and granted by way of gift to these elders on the next Elders’ day.
Official Side replied to this demand:
Considering the specific needs of the senior citizens, the basic exemption limit for a senior citizen i.e. above 80 years, is fixed at Rs. 5 Lakh. Hence, the demand of the Staff Side is not feasible.
However, the Chairman stated that the demand of the Staff Side should be re-examined by the Department of Revenue. He observed that there was a case that the requirement of mandatory filing of income tax returns by persons beyond a certain age may be dispensed with.
He advised the Department of Revenue to send him a report on this issue.
Some important questions and answers for pensioners:
What is considered as salary income?
Section 17 of the Income-tax Act defines the term ‘salary’. However, not going into the technical definition, generally whatever is received by an employee from an employer in cash, kind or as a facility [perquisite] is considered as salary.
If I receive my pension through a bank who will issue Form-16 or pension statement to me- the bank or my former employer?
Are retirement benefits like PF and Gratuity taxable?
In the hands of a Government employee Gratuity and PF receipts on retirement are exempt from tax. In the hands of non-Government employee, gratuity is exempt subject to the limits prescribed in this regard and PF receipts are exempt from tax, if the same are received from a recognised PF after rendering continuous service of not less than 5 years.
Is leave encashment taxable as salary?
It is taxable if received while in service. Leave encashment received at the time of retirement is exempt in the hands of the Government employee. In the hands of non-Government employee leave encashment will be exempt subject to the limit prescribed in this behalf under the Income-tax Law.
What is standard deduction?
The Finance Act, 2018 introduces the standard deduction of Rs. 40,000 from an income which is taxable under the had “Income from salary”. The standard deduction is allowed with effect from Assessment year 2019-20.
TDS (TAX DEDUCTED AT SOURCE) ON INCOME FROM PENSION
In the case of pensioners who receive their pension (not being family pension paid to a spouse) from a nationalized bank, the instructions contained in this circular shall apply in the same manner as they apply to salary-income.
The deductions from the amount of pension under section 80C on account of contribution to Life Insurance, Provident Fund, NSC etc., if the pensioner furnishes the relevant details to the banks, may be allowed.
Necessary instructions in this regard were issued by the Reserve Bank of India to the State Bank of India and other nationalized Banks vide RBI’s Pension Circular(Central Series) No.7/C.D.R./1992 (Ref. CO: DGBA: GA (NBS) No.60/GA.64 (11CVL)-/92) dated the 27th April 1992, and, these instructions should be followed by all the branches of the Banks, which have been entrusted with the task of payment of pensions.
Further all branches of the banks are bound u/s 203 to issue certificate of tax deducted in Form 16 to the pensioners as abolished vide CBDT circular no. 761 dated 13.1.98.