Hi,

Pension received by a family member is taxed under the head “income from other sources”. It is taxed in the hands of the receiver.

• Commuted Pension i.e lump sum amount of pension is not taxable.
• uncommuted pension received by a family member is exempt to a certain extent. Rs. 15,000 or 1/3rd of the uncommuted pension received – whichever is less is exempt from tax.

For example – If a family member receives a pension of Rs 1,00,000 during the year then the exemption available is least of – Rs 15,000 or Rs 33,333 (1/3rd of Rs 1,00,000). Thus the taxable family pension will beRs.85,000 (Rs 1,00,000 – Rs 15,000)

Hi,

The taxability of Pension depends on two factors. First Type of Pension and second type of Employee. The pension is taxable under the head of “Salary” in the hands of the receiver and in the year of receipt and tax is calculated in the following manner:

For example:- Mr. A is drawing a salary of Rs. 20,000 p.m. at the time of retirement and retires from service and becomes entitled to receive a pension of Rs 10,000 p.m. He gets half his pension commuted and receives Rs. 1,50,000/- as lump sum payment. Henceforth, he shall be entitled to a pension of Rs. 5,000 p.m. (If Ram commute his full pension then he will receive Rs 3,00,000)

Taxability:- 

1. Uncommuted Pension of Rs 5000 P.M is fully taxable.
2. Commuted Pension of Rs 1,50,000/-

If A is a Government Employee: Rs 1,50,000 is fully exempted.

If A is a non-Government Employee and also receiving Gratuity:

Exempted pension will be =  Rs 1,00,000 (1/3 X 3,00,000) and the taxable amount will be Rs 50,000/-

If A is a non-Government Employee and not receiving Gratuity:

Then Exempted pension will be =  Rs 150,000 (1/2 X 3,00,000) and the taxable amount will be Rs Nil.