Family pension is received by the spouse, children, or legal heirs of a deceased person. It is typically 50% of the last basic salary drawn.
Why is Family Pension Different from Salary and Pension?
| Income Type | When is it received? | How is it taxed? |
| Salary | Received during employment | Taxed under "Salary" |
| Pension | Received after retirement | Taxed under "Salary" |
| Family Pension | Received after the individual's death | Taxed under "Other Sources" |
Why Family Pension Not Treated as Salary?
In salary & pension, there is an employer-employee relationship.
In family pension, the deceased was the employee not recipient such as wife, spouse, or child.
As there is no employer-employee relationship, it falls under "Income from Other Sources."
Tax Treatment of Family Pension
| Deduction Allowed Lower of ₹25,000 or 1/3rd of family pension (Section 57(iia)). |
Example Calculation
If family pension is ₹6 lakh, 1/3rd = ₹2 lakh, but since ₹25,000 is lower, only ₹25,000 is deductible.
Taxable amount = ₹5,75,000
Note: Rebate u/s 87A amounting 75,000/- is not applicable as family pension does not comes under salary.
No Other Expenses Allowed as Deduction
Family pension falls under Income from Other Sources, where deductions are allowed only if expenses were incurred to earn the income.
Since no expenses are made to earn a family pension, only the fixed deduction (₹25,000 or 1/3rd) is allowed.
Two Cases Where Family Pension is Tax-Free
Family pension is completely exempt u/s 10(19):
Armed & Paramilitary Forces – If the deceased was a member.
Death While on Duty – If a government employee dies in service, their family pension is 100% tax-free.
FAQs
No, TDS is not deducted on family pension.
No, standard deduction is only available for salaried individuals and regular pensioners. It is not applicable to family pensioners.
Family pension must be reported under Income from Other Sources while filing the ITR.
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