Pensioners can claim deduction under Sec 16 of IT Act, 1961

Speed Post News Network

New Delhi : The Central Board of Direct Taxes (CBDT) on April 5, 2018, clarified that the pension received by a taxpayer from his former employer is taxable under the head “Salaries”.

The Finance Act, 2018, has amended Section 16 of the Income–tax Act, 1961 (“the Act”) to provide that a taxpayer having income chargeable under the head “Salaries” shall be allowed a deduction of Rs 40,000 or the amount of salary, whichever is less, for computing his taxable income. Accordingly, any taxpayer who is in receipt of pension from his former employer shall be entitled to claim a deduction of Rs 40,000 or the amount of pension, whichever is less, under Section 16 of the Act, according to a PIB release.

Earlier, representations were received seeking clarification as to whether a taxpayer, who receives pension from his former employer, shall also be eligible to claim this deduction.