Taxpayers who receive pension from their former employers are eligible to claim a standard deduction of Rs.40,000, the Income Tax department said on Thursday.
Keeping income tax rates and slabs unchanged, Budget 2018-19 introduced Rs.40,000 standard deduction for salaried employees and pensioners in lieu of the exemption to transport and medical expenses that were given till the just concluded financial year (2017-18).
The Central Board of Direct Taxes (CBDT) said it had received representations as to whether a taxpayer, who receives pension from his former employer, shall also be eligible to claim this deduction.
“The pension received by a taxpayer from his former employer is taxable under the head ‘salaries’ Accordingly, any taxpayer who is in receipt of pension from his former employer shall be entitled to claim a deduction of Rs.40,000 or the amount of pension, whichever is less, under Section 16 of the (I-T) Act,” CBDT said in a statement.
The standard deduction was discontinued from the assessment year 2006-07, but was re-introduced in 2018-19 Budget.
In 2017-18, no tax was applicable on Rs.19,200 of transport allowance and medical expenditure of up to Rs.15,000. This has now been subsumed into the new standard deduction of Rs.40,000.
