Tax on Family Pension —
Section 57(iia), Both Regimes
How family pension is taxed under "Income from Other Sources", the Section 57(iia) standard deduction (now up to Rs 25,000 in the new regime), why it survives in the default new regime, TDS, and how to report it in your ITR.
Family pension received by a widow, child or legal heir after the pensioner's death is taxable under "Income from Other Sources" — not under Salaries. A standard deduction is allowed under Section 57(iia): one-third of the family pension, capped at Rs 25,000 in the new regime (raised from Rs 15,000 by Budget 2024) or Rs 15,000 in the old regime. Crucially, this deduction is available even under the default new tax regime — one of very few deductions that survive there.
The retiree's own pension (received while alive) is taxed under "Salaries" with a Rs 75,000 (new) / Rs 50,000 (old) standard deduction. Family pension received by the widow or heir after death is always "Income from Other Sources", regardless of whether the deceased was a government or private-sector employee. The two are taxed differently and carry different deductions — reporting family pension under Salaries is a common error that triggers notices.
Pension Types — Tax Treatment Compared
Family pension, the retiree's own pension, commuted pension and NPS payouts are all taxed differently. This table shows the head of income, the governing section and the deduction for each.
| Pension type | Tax head | Section | Deduction | New regime? |
|---|---|---|---|---|
| Family pension (widow / heir) | Other Sources | 57(iia) | 1/3rd, max Rs 25,000 (new) / Rs 15,000 (old) | Yes |
| Retiree's own pension (while alive) | Salaries | 15–17 | Std dedn Rs 75,000 (new) / Rs 50,000 (old) | Yes |
| Commuted pension (lump sum) | Salaries | 10(10A) | Fully exempt (govt); partial for non-govt | Yes |
| NPS lump sum to nominee (on death) | Exempt | 10(12A) | Exempt in nominee's hands | Yes |
| Annuity bought from NPS corpus | Other Sources | 56 | Taxable at slab; no 57(iia) cap | Taxable |
Family pension of a family member of an armed-forces person who died in operational duty is fully exempt u/s 10(19).
The Family Pension Deduction — Both Regimes
Unlike Section 80C, HRA or 80D — all of which vanish in the new regime — the Section 57(iia) family-pension deduction is retained because it sits under "Income from Other Sources", not Chapter VI-A. Budget 2024 raised the cap to Rs 25,000 for taxpayers on the new regime; the old regime keeps the older Rs 15,000 ceiling.
Old regime
- Section 57(iia): one-third, max Rs 15,000
- 80C / 80D / HRA also available
- Standard deduction Rs 50,000 (on salary)
- Best if you have large deductions
New regime (default)
- Section 57(iia): one-third, max Rs 25,000
- Most other deductions disallowed
- Standard deduction Rs 75,000 (on salary)
- Rebate u/s 87A up to Rs 12L taxable income
- Usually better for pure family-pension income
If family pension (plus some interest income) is your main income, the new regime typically saves more: a higher Rs 25,000 pension deduction, lower slab rates and the 87A rebate up to Rs 12 lakh taxable income mean many family pensioners pay zero tax. Compare both before filing rather than assuming the old regime.
Not sure which regime is better for your pension income?
Compare with an expert →How Taxable Family Pension Is Calculated
The deduction is the lower of one-third of the family pension or the cap (Rs 25,000 new / Rs 15,000 old). The one-third rule only bites when the pension is small; above a certain level the flat cap applies.
Family pension Rs 3,00,000 — new regime
Family pension Rs 60,000 — new regime
In the first case the Rs 25,000 cap applies; in the second the one-third figure (Rs 20,000) is lower, so it is used. In the new regime, one-third is lower than Rs 25,000 only when the annual pension is below Rs 75,000. See our income-tax slabs to work out the tax on the taxable amount.
You get the 57(iia) deduction if
- You receive family pension as a widow, child or legal heir
- The amount is taxed under "Income from Other Sources"
- You claim it in Schedule OS of your ITR
No 57(iia) deduction if
- It is the retiree's own pension (that is Salaries)
- It is an annuity you bought from an NPS/insurer corpus
- The family pension is already fully exempt u/s 10(19) — armed-forces death
TDS & Reporting Family Pension in Your ITR
The paying bank or institution may deduct TDS on family pension. Because payers do not always account for the Section 57(iia) deduction, check Form 26AS / AIS before filing and claim any excess as a refund.
If family pension (with interest income and up to one house property) is your only income, use ITR-1 (Sahaj) and report it under "Income from Other Sources", entering the Section 57(iia) deduction in the same schedule. Use ITR-2 (Schedule OS) if you also have capital gains, foreign assets or more than one house property. Never report family pension under Salaries.
- Bank / PSU family-pension statement
- Form 26AS & AIS downloaded
- TDS reconciled against pension credited
- Gross pension entered in Schedule OS
- Section 57(iia) deduction claimed
- Correct cap applied (Rs 25,000 new / Rs 15,000 old)
- Regime compared (old vs new)
- 87A rebate checked (new regime)
- Correct ITR form chosen
- Return e-verified within 30 days
Some payers deduct TDS on family pension under Section 192 (as if it were salary) or omit the 57(iia) deduction entirely. This often means excess TDS. The head of income is still "Other Sources" regardless of how the payer coded it — report it correctly and claim the refund of any over-deduction in your ITR.
Want us to reconcile the TDS and file your family-pension return?
Get ITR Filing Help →Family Pension Tax — Frequently Asked Questions
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