Income Tax Department (CBDT)
Family Pension Tax 2026
Standard Deduction Clarification
Family Pension Tax Rules 2026: Standard Deduction Under New Tax Regime
- Topic: Tax on Family Pension
- Regime: New Tax Regime (Default)
- Benefit: Standard Deduction Applicable
- Section: 57(iia) of IT Act
What Changed: New Regime Benefit
With the New Tax Regime becoming the default option for FY 2025-26, many Family Pensioners (widows/dependents) were confused about their tax liability. The Income Tax Department has clarified that the Standard Deduction benefit is indeed available for Family Pensioners under the New Regime, similar to salaried employees.
✅ The Tax Break (Section 57(iia))
Family Pension is taxed under “Income from Other Sources”.
Deduction Allowed: You can deduct a sum equal to 33.33% (1/3rd) of such income OR ₹15,000 (whichever is less).
Note: Recent budget proposals have often discussed enhancing this limit (e.g., to ₹25,000), so check your final ITR form.
Calculation Example (FY 2025-26)
If a widow receives ₹50,000 per month as Family Pension:
| Component | Calculation | Amount (₹) |
|---|---|---|
| Gross Annual Pension | 50,000 x 12 | 6,00,000 |
| Less: Standard Deduction | Max Limit (u/s 57) | (-) 15,000 |
| Net Taxable Income | 6,00,000 – 15,000 | 5,85,000 |
| Tax Liability (New Regime) | Up to ₹3L: Nil ₹3L-₹7L: 5% (Rebate u/s 87A applies) |
NIL |
How to Claim
While filing ITR-2 or ITR-1:
“1. Go to ‘Income from Other Sources’.
2. Select ‘Family Pension’.
3. The utility usually auto-calculates the deduction u/s 57(iia).
4. Ensure you do not club this with ‘Salary Income’ standard deduction (₹75,000) which is for employees, not family pensioners.”
Frequently Asked Questions
Is Family Pension taxed as Salary?
No. Family Pension is taxed as “Income from Other Sources”. Therefore, the Standard Deduction of ₹75,000 (available to salaried employees/pensioners) is NOT available to Family Pensioners. They get the specific deduction u/s 57(iia).
Is Gallantry Award Pension taxable?
No. Family Pension received by the family members of Armed Forces personnel who have been awarded Param Vir Chakra, Maha Vir Chakra, or Vir Chakra (and other notified gallantry awards) is fully exempt from Income Tax.
