Pensioners and Senior Citizens

Pension

Pension is described in section 60 of the CPC and section 11 of the Pension Act as a periodical allowance or stipend granted on account of past service, particular merits etc. There are three important features of ‘pension’. Firstly, pension is a compensation for past service. Secondly, it owes its origin to a past employer-employee or master-servant relationship. Thirdly, it is paid on the basis of earlier relationship of an agreement of service as opposed to an agreement for service. This relationship terminates only on the death of the concerned employee.

Pension received from a former employer is taxable as ‘Salary’. Hence, the various deductions available on salary income, are also available to pensioners.

Pension to officials of UNO is exempt from taxation.

Family Pension

Family pension is defined in Section 57 as a regular monthly amount payable by the employer to a person belonging to the family of an employee in the event of his/her death. Pension and family pension are qualitatively different. The former is paid during the lifetime of the employee while the latter is paid on his/her death to surviving family members. However, in case of family pension, since there is no employer-employee relationship between the payer and the payee, therefore, it is taxed as ‘Income from Other Sources’ in the hands of the nominee(s). In respect of family pension, deduction u/s 57(iia) of Rs. 15000/- or 1/3rd of the amount received whichever is less, is available.

Senior Citizen

Under the Income Tax Act, a senior citizen is a person who at any time during the previous year has attained the age of 65 years or more. There are certain benefits available to senior citizen under the Income Tax Act.

1. The maximum amount of income not chargeable to tax in respect of senior citizens has been increased to Rs. 1.85 lacs. Thus, no tax is payable by a senior citizen if the total income is upto Rs. 1.85 lacs. (This limit has been further increased to Rs. 1.95 lacs for A.Y. 2008-09).
2. The 1 out of 6 criteria for filing of income tax return under proviso to Sec. 139(1) is not applicable in case of senior citizen. However, if a senior citizen meets any of the four criteria, other than ownership of immovable property or subscription to a telephone, then return will have to be filed by him.
3. The deduction available u/s 80D for medical insurance premium paid is available up to Rs. 15,000/- for senior citizens. (This limit has been further increased to Rs. 20,000/- from A.Y.2008-09).
4. The deduction available u/s 80DDB in respect of expenditure incurred on treatment of specified diseases is available up to Rs. 60,000/- for senior citizens.

For further details/current status/clarifications on the above, please click here to log on to the web site of Income Tax Department.

Disclaimer:

The above information has been given with the objective of providing basic guidance for compiling Income Tax return by salaried class of tax payers. The information given is, therefore, not complete and up-to-date. The contents of this page or any part thereof cannot be treated or interpreted as a statement of law. The visitors of this site are requested to refer to the Income Tax Act 1961 and Income Tax Rules 1962 for any doubt or clarifications. In case , any loss or damage is caused to any body due to treating or interpreting the contents of this page as a complete and up-to-date statement of law out of ignorance or otherwise, this site  will not be liable in any manner whatsoever for such loss or damage.

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