Yes, pension earners are required to file Income Tax Return if their total income (before claiming deductions under section 80C to 80U) exceeds
We are talking about total income and not just your pension income. In case you have earnings from any house property like rental income or other sources like interest etc, your aggregate income from all sources should be considered in checking above limits.
To find an answer to this, we need to divide our discussion in two parts
In the first instance, income should be disclosed
(The tax implications arising in case of pensioner receiving the amount has been explained below)
In case where family members receive the pension, after demise of pension holder, it shall be shown as Income From Other Sources. The reason being the pension does not accrue because of any service rendered to employer by the family members.
Commuted i.e. lump sum pension received by family members is EXEMPT from tax.
Uncommuted pension i.e. pension received periodically by family members is exempt minimum of
Rs.15,000/- or 1/3rd of pension amount
For understanding the tax implications here, first we need to understand that pension can be categorised into two partsCommuted pension
Commuted pension means amount of pension received in lump sum. It can be the complete pension or a specified part of total pension.
If Sharma ji is eligible for total pension of say Rs.10 lakhs, he can opt to seek complete amount of Rs. 10 lakh in lump sum as commuted pension. Otherwise he can also, seek any part of it say Rs. 01 lakhs or 02 lacs or 05 lakhs in one go and rest in periodic installments.
Uncommuted pension is pension received periodically, and this period is normally fixed at monthly rests.
“The golden rule of pension says that UNCOMMUTED PENSION is ALWAYS TAXABLE”
Commuted pension when received by government employees OR employees retiring form defence services it is FULLY EXEMPT from levy of taxes.
For Non Government employees (if 100% pension is commuted), the exemption granted is partial depending upon whether a person also receives gratuity.
Receiving pension gives us a sigh of relief but thinking about tax filing frightens. But no any more!! For any further information desired post your comments below and if you are looking for any help with filing your return and managing taxes Contact us now!!!!
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