The government today clarified that individuals who receive pension from their former employers will be entitled to claim the standard deduction of Rs 40,000. Pension received from a former employer is taxable under ‘salary’, according to a statement from Central Board of Direct Taxes (CBDT).
The Finance Act 2018, has introduced standard deduction of Rs 40,000 which is to be allowed against salary income. If their pension is lower than this figure, then the deduction allowed will be limited to the actual pension received.
The standard deduction has been introduced by the Finance Minister in lieu of the medical reimbursement (Rs 15,000 per year) and transport allowance (Rs 1,600 per month). Thus, those in employment got a benefit of only Rs 5,800. However it will benefit pensioners, who do not receive medical reimbursement or transport allowance benefits.