How is family pension taxed

A family pension — the pension paid to a dependant (such as a spouse) after the pensioner's death — is taxed under "income from other sources", not as salary. This differs from a regular pension received by the pensioner themselves, which is taxed as salary.

You don't pay tax on the full family pension: a standard deduction is allowed — the lower of one-third of the pension or a capped amount (Rs 15,000 in the old regime, with a higher cap of Rs 25,000 in the new regime). This reduces the taxable portion.

Because it's taxed as other income rather than salary, report family pension under the correct head, applying the standard deduction. Misreporting it as salary, or forgetting the deduction, are common errors that affect your tax.

Family pension received by family members of armed forces personnel (in certain circumstances) and of gallantry-award winners can be fully exempt. If this applies, the pension isn't taxed at all — confirm whether your situation qualifies.

The taxable family pension adds to the recipient's other income and is taxed at their slab. A senior-citizen recipient gets the higher basic exemption and 80TTB, which can keep the overall tax low. Plan it within the recipient's full position.