When a family member (spouse or dependent) receives pension after the death of an employee, a standard deduction is available on that family pension income. This deduction is available even under the New Regime and was enhanced in Budget 2024.
Key Details
- Deduction = 1/3rd of family pension OR ₹25,000, whichever is lower
- Increased from ₹15,000 to ₹25,000 in Union Budget 2024
- Available in both Old Regime and New Regime
- Applicable only to family pension (not pension received by the retiree themselves)
- Family pension is taxable under "Income from Other Sources"
Example
- Monthly family pension: ₹20,000 (Annual: ₹2,40,000)
- 1/3rd of ₹2,40,000 = ₹80,000
- Maximum allowed deduction: ₹25,000
- Taxable family pension: ₹2,40,000 − ₹25,000 = ₹2,15,000
This guide reflects FY 2025-26 (AY 2026-27) and is for general information. Tax rules and limits change, and how they apply depends on your circumstances. It is not professional tax advice; consult a qualified Chartered Accountant before acting.
