No Standard deduction for family pension

Retiree-pensioners get the  benefit of standard deduction of Rs 50000 as pension for retirees is treated as income for salaries.But in the case of family pensioners , the pension is treated by income tax rules as 'income from other sources' and hence they are not eligible for standard deduction for income tax purposes.

But as per our pension rules, the liability for family pension is created by LIC on death of a retiree or an pension optee while in service.The present value of  the liability created for the purpose becomes part of the additional contribution made by LIC to the Pension Trust and this additional contribution is debited to Salary and other benefits to employees.But at the pension pay-out stage it is an immediate annuity payment to the family pensioner from the LIC P & GS department.The purchase price paid by the Pension Trust to the P & GS dept is the consideration for the annuity paid to the family pensioner.

To me it  appears a technical anomaly in accounting principles followed.This has also implications on the valuation of cost of pension liabilities.If we go by the income tax rules,the cost of family pension should not go to the debit of Salary etc expenses account,but a separate account  may need to  be  maintained for retirees and family  pensioners both in the matter of contributions as well as the funded liability.But the ambiguity  arises because  the  10% Corporation's contribution may  also cover the invisible notional contribution towards family pension when the contingency arises,while the liability for family pension is actually provided for through additional contributions.

The  Chartered Accountants  among  our pensioner friends may throw some light on this.

C H Mahadevan 

PS : Income Tax Department allows deduction of Rs 15000 or 1/3 rd of Family Pension whichever is lower.

R K SAHNI 

"Family Pensions to Dependent Nominees Family pension payments are taxed under the head "Income From Other Sources" in their Income Tax filings. Family pension exemptions on uncommuted pensions are set to a maximum of ₹15,000 or a third of the pension received - whichever is lower."