If you receive a family pension, the monthly amount paid to a spouse or dependent after a government or other employee passes away, it’s taxable, but not in the way most people assume. Family pension isn’t taxed as salary. Additionally, it doesn’t get the same standard deduction a working employee or the original pensioner would. It has its own specific rule, with its own deduction, under Section 57(iia) of the Income Tax Act.
A note on section numbers: under the Income Tax Act, 2025, effective April 1, 2026, this provision has been renumbered as Section 93. The deduction structure and amounts remain unchanged, only the section reference has changed.
Family Pension vs Your Own Pension: Why the Distinction Matters
This is worth understanding clearly before anything else, since it’s the source of most confusion. There are two very different things people call “pension”:
- Your own (retirement) pension: What a retired employee draws for their own service. This is taxed as salary income and gets the standard deduction, ₹75,000 under the New Tax Regime or ₹50,000 under the Old Tax Regime.
- Family pension: What a spouse or dependent receives after that employee has passed away. This is taxed under “Income from Other Sources,” not salary, and does not get the standard salary deduction at all. Instead, it gets its own, separate deduction under Section 57(iia).
If you’re a family pensioner, don’t apply the ₹75,000 or ₹50,000 standard deduction to your family pension, it doesn’t apply here.
The Family Pension Deduction Amount
You can deduct the lower of one-third of your family pension, or a fixed cap:
- New Tax Regime: ₹25,000 cap
- Old Tax Regime: ₹15,000 cap
The New Regime’s ₹25,000 cap is a relatively recent increase, raised from ₹15,000 by the Finance (No. 2) Act, 2024, effective from Assessment Year 2025-26 onward. This means the New Tax Regime is actually more generous than the Old Regime for this specific deduction, an unusual reversal compared to most other Chapter VI-A deductions, which typically favour the Old Regime or aren’t available under the new one at all.
A Worked Example
Mrs. Rao receives a family pension of ₹1,20,000 for the year, following her husband’s passing after his retirement from government service.
- One-third of ₹1,20,000 = ₹40,000
- Under the Old Regime, her deduction is capped at ₹15,000 (since ₹15,000 is lower than ₹40,000)
- Under the New Regime, her deduction is capped at ₹25,000 (since ₹25,000 is lower than ₹40,000)
So under the New Regime, ₹95,000 of her family pension would be added to her taxable income; under the Old Regime, it would be ₹1,05,000.
Is the Family Pension Deduction Available Under the New Tax Regime?
Yes, and this is genuinely worth knowing, since so few Chapter VI-A style deductions survive under the New Tax Regime. The family pension deduction under Section 57(iia) is one of the exceptions, specifically preserved, and with a higher cap than the Old Regime. If you’re a family pensioner on the New Regime, make sure you’re actually claiming this, it’s easy to miss since it isn’t as widely discussed as the standard salary deduction.
When Is Family Pension Completely Tax-Free?
There’s one significant exemption worth knowing. Family pension received by the family of an armed forces member (including para-military forces) who died in the course of operational duty is fully exempt from tax under Section 10(19). It is not just reduced by a deduction, but entirely excluded from taxable income. Family pension received by families of gallantry award recipients (Param Vir Chakra, Maha Vir Chakra, Vir Chakra, and other notified awards) also qualifies for full exemption under a separate provision.
How to Report This in Your ITR
Report your family pension under “Income from Other Sources,” not under “Salary.” Most tax filing portals and utilities will show a specific field for family pension within this section. Here, the Section 57(iia) deduction is typically calculated automatically once you enter the pension amount. Double-check that you haven’t accidentally applied the salaried standard deduction to this income instead, since the two are calculated differently and aren’t interchangeable.
Frequently Asked Questions
What is the family pension deduction amount?
The lower of one-third of your family pension or a fixed cap, ₹25,000 under the New Tax Regime, or ₹15,000 under the Old Tax Regime.
Is family pension taxed the same way as a regular pension?
No. Your own retirement pension is taxed as salary income with the standard deduction (₹75,000 new regime, ₹50,000 old regime). Family pension, received by a survivor after the employee’s death, is taxed under “Income from Other Sources” with its own separate, smaller deduction.
Can I claim the family pension deduction under the New Tax Regime?
Yes. This is one of the few deductions specifically preserved under the New Tax Regime, and its cap (₹25,000) is actually higher than the Old Regime’s cap (₹15,000).
Is family pension ever completely tax-free?
Yes, in specific cases. Family pension received by the family of an armed forces or para-military member who died during operational duty is fully exempt under Section 10(19). Families of certain gallantry award recipients also qualify for full exemption.
Where do I report family pension in my income tax return?
Under “Income from Other Sources,” not “Salary.” The deduction under Section 57(iia) is typically calculated automatically in most filing portals once you enter the family pension amount.
Has the family pension deduction section been renamed under the new tax law?
Yes. Under the Income Tax Act, 2025, Section 57(iia) has been renumbered as Section 93. The deduction amounts and structure remain unchanged, only the section reference has changed.
Last Updated on 24 seconds ago by Team Paisaseekho
