Pensioners can claim ₹40,000 standard deduction from ex-employers

Budget 2018-19 introduced ₹40,000 standard deduction for salaried employees and pensioners in lieu of the exemption in respect of transport and medical expenses that was given till last financial year (2017-18).

Taxpayers who receive pension from their former employers are eligible to claim standard deduction of ₹40,000, the Income Tax department said on Thursday.

The CBDT had received representations as to whether a taxpayer, who receives pension from his former employer, shall also be eligible to claim this deduction. (Representative image)

Keeping income tax rates and slabs unchanged, Budget 2018-19 introduced ₹40,000 standard deduction for salaried employees and pensioners in lieu of the exemption in respect of transport and medical expenses that was given till last 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 ₹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 ₹19,200 of transport allowance and medical expenditure of up to ₹15,000. This has now been subsumed into the new standard deduction of ₹40,000.