Family Pension Deduction: One-Third, ₹15,000 or ₹25,000
Family pension is taxed under other sources, not salary.
The deduction is the lower of one-third of family pension or ₹15,000 in the old regime; the monetary ceiling is ₹25,000 under the default regime.
Use the Family Pension Standard Deduction Calculator to apply these points to your figures.
Legal or Computational Framework
Governing rule
Operational-duty family pension for specified armed/paramilitary deaths can be exempt. The recipient does not claim the salary standard deduction on family pension.
The classification matters because it changes which deduction applies. Family pension (paid to the legal heir/nominee after a pensioner’s death) is taxed as "Income from other sources," not salary — unlike the pension the retiree themselves received while alive, which is taxed as salary and eligible for the full salary standard deduction. Because family pension isn’t salary, the recipient cannot claim the salary standard deduction at all; instead a separate, smaller deduction applies specifically to family pension — the lower of one-third of the pension amount or a fixed monetary ceiling.
For the connected rule or filing step, see Table/Return Table III: Family pension or survivor-benefit factor table.
Correct calculation method
Identify regular versus family pension; test specific exemption; compute one-third; apply regime ceiling; add other income and TDS.
The ceiling itself differs by regime, which is where most calculation errors happen: the old (optional) regime caps the deduction at ₹15,000, while the default (new) regime raised that ceiling to ₹25,000. Either way, the deduction is capped at whichever is lower — one-third of the family pension, or the regime’s monetary ceiling — so a small family pension can be fully covered by the one-third test alone, never reaching the ceiling at all.
Step-by-step workflow
- Identify regular versus family pension.
- test specific exemption.
- compute one-third.
- apply regime ceiling.
- add other income and TDS.
Worked example
Family pension ₹90,000 gives one-third ₹30,000. Deduction is ₹25,000 under the default regime and ₹15,000 under the old regime.
Contrast this with a smaller family pension of ₹30,000: one-third is only ₹10,000, which is below BOTH regime ceilings — so the full ₹10,000 is deductible under either regime, and the ₹15,000/₹25,000 ceiling never comes into play at all. The ceiling only binds once one-third of the pension exceeds it, which needs family pension above ₹45,000 (old regime) or ₹75,000 (default regime) a year.
The example is an illustration, not a substitute for the taxpayer's facts. A change in status, period, payment mode, document, city, asset, relationship or scheme can change the result.
Why generic pages get this wrong
Search pages often state a rate or limit without identifying the governing base. The calculation must distinguish gross receipt from taxable profit, tax from TDS, a deduction from an exemption, salary from business income, and an accounting entry from the tax treatment.
Decision matrix
| Decision point | Required treatment |
|---|---|
| Legal year | Use the Act, rules and notification effective for the income or transaction period |
| Taxpayer category | Confirm residence, age, entity, employee/business status and regime |
| Calculation base | Use the statutory definition rather than CTC, net bank receipt or accounting label |
| Ceiling or rate | Apply actual-amount, percentage, shared, lifetime and gross-income limits in sequence |
| Documentation | Link every input to an invoice, statement, contract, certificate or official record |
| Final output | Show tax, surcharge, cess, interest and TDS/TCS credits separately |
Entity and topical coverage
This page is written around the entities and concepts search engines expect for the topic: pension, commuted pension, family pension, standard deduction, section 194P. They are used only where relevant and are connected to the live calculator and knowledge hub rather than repeated mechanically.
What Generic Pages Miss
- Treating family pension as salary: it is reported under "Income from other sources," not the Salary schedule, and the salary standard deduction (₹75,000/₹50,000 depending on regime) does not apply to it.
- Claiming standard deduction per payer: if there are multiple family-pension payers, the one-third/ceiling deduction is computed on the aggregate family pension received, not separately per payer.
- Using cash commuted amount as denominator: the one-third test applies to the recurring (uncommuted) family pension actually received in the year, not any lump-sum commuted portion, which has its own separate exemption treatment.
- Ignoring gratuity condition: family pension’s tax treatment is independent of whether death gratuity was also paid — the two benefits are taxed under entirely separate provisions and should not be netted against each other.
- Assuming bank TDS is final: banks often deduct TDS on family pension without applying the one-third deduction at source, so the recipient must still claim the correct deduction while filing the return, not merely accept the TDS as the final tax figure.
Practical Documentation Checklist
- Pension payment order
- Commutation statement
- Gratuity record
- Bank/TDS statement
- Family pension sanction
- Regime computation
See the broader Income Tax & Salary knowledge hub for related rules and calculators on this topic.
Finin2min Summary
Family pension is taxed under other sources, not salary. The deduction is the lower of one-third of family pension or ₹15,000 in the old regime; the monetary ceiling is ₹25,000 under the default regime.
Finin2min rule: establish eligibility, calculate transparently, and preserve an audit trail.
Frequently Asked Questions
Source and review trail
Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.
- Primary category
- Income Tax
- Official starting point
- www.incometax.gov.in