New Delhi, April 5, 2018

The Centre has clarified that taxpayers who receive pension from their former employer are entitled to standard deduction benefit announced in this year’s budget.

They can claim a deduction of Rs 40,000 or the amount of pension, whichever is less, as a deduction, an official release said.

This facility of standard deduction is available as the pension received by a taxpayer from his former employer is taxable under the head “salaries”, the release added.

Representations had been received seeking clarification as to whether a taxpayer, who receives pension from his former employer, would also be eligible to claim this deduction.

Finance Act 2018 had amended Section 16 of the income-tax law to provide that a taxpayer having income chargeable under the head “salaries” would be allowed a deduction of Rs 40,000 or the amount of salary, whichever is less, for computing his taxable income.

[The Hindu Business Line]