Business Today: pension vs family

Business Today published an explainer on June 3 warning retirees and survivors not to treat all pension receipts the same when filing income-tax returns for assessment year 2026-27. The article said ordinary pension and family pension fall under different heads of income, and that the distinction changes deductions, withholding and the final tax bill. The publication cited O.P. Yadav, tax evangelist at Prosperr.io and a former principal commissioner in the Income Tax Department, as saying confusion over the two remains common in filing season. (businesstoday.in) Official guidance from India’s Income Tax Department draws the same line between pension taxed as salary and family pension taxed as income from other sources. ### Why is an ordinary pension still treated as salary after retirement? The Income Tax Department says uncommuted monthly pension received by a retired employee is taxable under the head “Salaries.” The department’s pension guide says that treatment follows from the employer-employee relationship out of which the pension arises. (businesstoday.in) Business Today said that classification means pensioners can claim the standard deduction available to salaried taxpayers. O.P. Yadav told Business Today that regular pension “continues to retain the character of salary” even after retirement. The Economic Times, citing Yadav, said Section 17(1) includes pension within salary, and that this is what makes the standard deduction under Section 16 available to pensioners. ### When does a payment become family pension instead? (businesstoday.in) Business Today said family pension arises when a spouse or legal heir receives pension after the death of an employee or pensioner. The article said that because there is no employer-employee relationship between the recipient and the pension-paying authority, the income is taxed under “Income from Other Sources,” not under salary. The Income Tax Department’s pension guide uses the same definition, describing family pension as pension received by family members after the death of the employee. (incometaxindia.gov.in) Section 57 of the Income-tax Act, as published by the Central Board of Direct Taxes, defines family pension as a regular monthly amount payable by the employer to a family member on the employee’s death. That section places the deduction for family pension inside the rules for computing income from other sources, not salary income. (businesstoday.in) ### Which deduction changes when the income is classified correctly? Business Today said pensioners can claim a standard deduction of up to 50,000 rupees under the old tax regime and up to 75,000 rupees under the new tax regime. The article said family pensioners cannot use that salary deduction because their income is not taxed under the salary head. Section 57(iia), as reproduced on the CBDT site, allows a separate deduction for family pension under income from other sources. (businesstoday.in) Business Today said that deduction is one-third of family pension or 15,000 rupees under the old regime, whichever is lower, and one-third of family pension or 25,000 rupees under the new regime, whichever is lower. ### What goes wrong if a retiree files under the wrong head? Business Today said incorrect classification can affect deductions, tax deducted at source and overall tax calculations. (incometaxindia.gov.in) Yadav told the publication that reporting family pension as salary can lead to excess deduction claims and tax mismatches. The Economic Times said the same mistake can produce denied deductions and compliance issues. For filers with more than one retirement-income stream, the issue is not only labels used in conversation. (businesstoday.in) The legal nature of each receipt determines whether it belongs under salaries or income from other sources, according to the Income Tax Department guide and the CBDT text of Section 57. ### What should cross-border retirees check before filing? Business Today framed the distinction as a practical filing issue for retirees and family pensioners preparing AY 2026-27 returns. (incometaxindia.gov.in) For taxpayers receiving state pension, private pension and survivor income from different payers, each stream needs to be classified separately before deductions are applied, based on the rules set out in the tax department guide and Section 57. The filing task now is to match each receipt to its legal category before the AY 2026-27 return is submitted. (businesstoday.in) Business Today’s June 3 explainer and the Income Tax Department’s pension guide remain the clearest starting points for that classification exercise. (incometaxindia.gov.in)