Pensions are subject to the Income From Salaries tax. A most common query I came across recently was why are pensions taxed. Pensions in India are taxed primarily because they constitute a form of income, and income tax principles apply equally whether earnings come from work or retirement.
Why am I Paying Tax on My Pension?
Uncommuted Pension: Regular pension payments, whether from government, private employer, or life-insurance schemes, are considered “Income from Salary” and are fully taxable at the individual’s applicable tax slab rates.
Commuted Pension: A commuted pension is a lump-sum amount taken in lieu of future periodic pension. Government employees enjoy full income-tax exemption under Section 10(10A). Non-government employees receive partial exemption:
If gratuity is received, one-third of the commuted amount is exempt;
Otherwise, one-half is exempt. The balance is taxed.
Family Pension: Paid to a survivor after a pensioner’s death, this is taxed under “Income from Other Sources.” Beneficiaries are eligible for a standard deduction equal to Rs 15,000 or one-third of the family pension, whichever is lower.
I hope you understood why do I have to pay tax on my pension.
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Why are Pensions Taxed?
aryan9
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5 months
2025-06-19T16:11:14+00:00 2025-06-19T16:11:16+00:00Comment
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