ITR filing for Family pension - A Complete Guide
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Welcome to our guide on filing Income Tax Returns (ITR) for family pension recipients! Whether you’re new to the concept or need a refresher, we’ve got you covered. In this guide, we’ll break down everything you need to know about ITR filing for family pension in simple language, so let’s dive in!
What is Family pension?
Before we get into the nitty-gritty of ITR filing, let’s quickly understand what family pension is. Family pension is a regular payment made by the government or an employer to the family members of a deceased individual who was entitled to receive pension benefits. It serves as a financial support system for the family after the demise of the primary breadearner.
Do Family Pensioners Need to File ITR?
Yes, family pensioners are required to file Income Tax Returns if their total income exceeds the basic exemption limit set by the Income Tax Department. The basic exemption limit varies each year and depends on factors like age and income sources.
Determining Taxable Income
To calculate your taxable income as a family pensioner, you need to consider the following components:
Family Pension: Family pension serves as the primary source of income for individuals who are recipients of it. This pension is typically received by the family members of a deceased government employee or an employee covered under a pension scheme. It’s important to note that while family pension provides financial support, it’s also subject to taxation under the head ‘Income from Other Sources’ in the Income Tax Act.
Family pension is taxable in the hands of the recipient, i.e., the family member receiving the pension. The pension amount received should be declared in the appropriate section of the Income Tax Return (ITR) form, ensuring accurate reporting to avoid any discrepancies.
Interest Income: Interest income refers to the earnings generated from various financial instruments such as savings accounts, fixed deposits, recurring deposits, and investments like bonds or debentures. As a family pensioner, if you have any savings or investments that generate interest income, it is also considered taxable.
It’s crucial to report all interest income earned during the financial year in your ITR. The interest income should be disclosed under the respective head, depending on the nature of the investment. Failure to report interest income can lead to penalties or legal consequences, so it’s essential to ensure full disclosure.
Other Sources of Income: Apart from family pension and interest income, family pensioners may have additional sources of income that contribute to their total taxable income. These sources could include rental income from property owned, capital gains from the sale of assets like real estate or stocks, or income earned from freelancing or consultancy services.
All such sources of income must be accurately accounted for and declared in the ITR form. Depending on the nature of the income, different sections of the ITR form may need to be filled out. It’s important to keep detailed records of all income sources and associated expenses to facilitate accurate reporting and computation of taxable income.
Taxation of Family pension
On death of the breadearner, the regular periodic family pension payments, is partially exempt from taxation. The exemption is provided to a certain extent to alleviate the tax burden on pensioners. According to the Income Tax section 57, an exemption is available for family pension to the extent of Rs. 15,000 or 1/3rd of the family pension received, whichever is less. Family pension should be declared under income from other sources.
Example: Let’s consider an example to illustrate the calculation of taxable family pension: If a family member receives a pension of Rs. 1,00,000, the exemption available would be the least of:
- Rs. 15,000
- Rs. 33,333 (1/3rd of Rs. 1,00,000)
In this case, the exemption available is Rs. 15,000. Thus, the taxable family pension would be: Rs. 1,00,000 – Rs. 15,000 = Rs. 85,000
Taxation of Commuted or Lump Sum Pension
This is a case if the Pensioner is alive whose pension is taxable as Salary. Commutation refers to converting a part of the pension into a lump sum payment. If the pension received by a family member is commuted or received as a lump sum payment, taxability is determined by whether the person is a government or private employee.Â
Commuted or lump sum pension received by a government employee is tax free.
For non-government employees, the tax treatment of commuted pension depends on whether gratuity is also received.
- If both gratuity and pension are received, 1/3rd of the commuted pension is exempt if 100% of the pension was commuted.
- If only pension is received without gratuity, and 100% of the pension was commuted, then 50% of the pension amount is exempt.
Taxation of Uncommuted Pension
This is a case if the Pensioner is alive whose pension is taxable as Salary. Uncommuted pension or any periodical payment of pension is fully taxable as salary.
Selecting ITR form
Choosing the right ITR form is crucial for accurate and efficient filing of your tax returns. As a family pensioner, you’ll likely need to select between ITR-1 (Sahaj) and ITR-2, depending on the complexity of your income sources and financial transactions.
ITR-1 (Sahaj): ITR-1, also known as Sahaj, is the most basic and commonly used form for individual taxpayers. It is suitable for individuals who have income from salaries, one house property, other sources (including family pension), and whose total income does not exceed Rs. 50 lakhs. However, if you have income from more than one house property, lottery winnings, or income from business or profession, you cannot use ITR-1.
Family pensioners with straightforward income sources, including family pension, interest income, and perhaps income from a single house property, can opt for ITR-1.Â
ITR-2: ITR-2 is applicable to individuals who do not have income from business or profession. It is suitable for individuals with income from more than one house property, capital gains, and other sources, in addition to income from salaries and family pension.
If your income sources are more diverse or complex, such as having multiple house properties, capital gains from the sale of assets, or foreign assets/income, you’ll likely need to use ITR-2. This form allows for the declaration of various types of income and provides additional schedules to report such income in detail.
Choosing the appropriate ITR form ensures that you accurately report all your income sources and comply with the Income Tax Department’s requirements. Filing the wrong form can lead to errors, delays, or even penalties, so it’s essential to carefully assess your income sources before selecting the form.
Due date of ITR filing for Family pension
The due date to file ITR for family pesnsion is 31st July. The last date to file revised ITR if correction is required due to mistake made is 31st December. Also the last date to file belated ITR is 31st December.
Documents required for ITR filing for Contract employees
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Bank Statements: Collect your bank statements showing family pension.
Investment Proofs: If you’ve made any investments eligible for tax deductions under Section 80C, such as PPF, ELSS, or life insurance premiums, keep the proofs handy.
Other Income Proofs: Gather documents supporting any other sources of income like rental income, capital gains, etc.
- 26AS and Annual Information statement (AIS): 26AS will reflect any TDS transaction. AIS will show income from other sources too like saving interest, FD interest, purchase and sell of shares or mutual funds, etc
ITR filing process
Step 1: Gather Necessary Documents as mentioned above
Step 2: Choose the Right ITR Form
As family pensioner, you’ll likely file ITR using Form ITR-1 or Form ITR-2, depending on your income sources.
Step 3: Fill in the Details
Ensure you input accurate information regarding your income, deductions, and tax payments. Double-check to avoid any errors that might lead to complications later on.
Step 4: Claim Deductions
You’re entitled to various deductions under Section 80C (like investments in PPF, LIC, etc.), Section 80D (health insurance premiums), and Section 80G (donations). Claim these deductions wisely to minimize your tax liability.
Step 5: Submit and Verify
Once you’ve filled in all the required details and submitted the ITR, it’s time to verify your return. You can do this electronically using Aadhaar OTP, Net Banking, or by sending a signed physical copy.Â
Step 6: Keep Records
After filing your ITR, maintain copies of the filed return, acknowledgment receipt, and supporting documents for future reference. These records are essential for income tax notice.
Income tax slab for family pensioner below 60 years (Old Regime)
| Income | Tax rates |
| Less than Rs.2,50,000 | 0% |
| Rs.2,50,000 – Rs.5,00,000 | 5% |
| Rs.5,00,001 – Rs.10,00,000 | 20% |
| More than Rs.10,00,000 | 30% |
Income tax slab for family pensioner below 60 years (New Regime)
| Income | Tax rates |
| Less than Rs.3,00,000 | 0% |
| Rs.3,00,001 – Rs.6,00,000 | 5% |
| Rs.6,00,001 – Rs.9,00,000 | 10% |
| Rs.900,001 – Rs.12,00,000 | 15% |
| Rs.12,00,001 – Rs.15,00,000 | 20% |
| More than Rs.15,00,000 | 30% |
Income tax slab for family pensioner between 60 & 80 years
| Income | Tax rates |
| Less than Rs.3,00,000 | 0% |
| Rs.3,00,001 – Rs.5,00,000 | 5% |
| Rs.5,00,001 – Rs.10,00,000 | 20% |
| More than Rs.10,00,000 | 30% |
Income tax slab for family pensioner above 80 years
| Income | Tax rates |
| Less than Rs.5,00,000 | 0% |
| Rs.5,00,001 – Rs.10,00,000 | 20% |
| More than Rs.10,00,000 | 30% |
Conclusion
Filing Income Tax Returns for family pensioners may seem daunting at first, but with the right information and guidance, it can be a straightforward process. By understanding the basics of ITR filing, selecting the appropriate form, and accurately reporting your income, you can fulfill your tax obligations efficiently.Â
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FAQ (Frequently asked Questions)
1. Do I need to file Income Tax Returns (ITR) if I receive family pension? Yes, family pensioners are required to file ITR if their total income exceeds the basic exemption limit set by the Income Tax Department.
2. Under which head should I declare family pension income in my ITR? Family pension income should be declared under the head ‘Income from Other Sources’ in your ITR.
3. Is family pension fully taxable? Family pension is generally taxable, but there are exemptions available for certain portions of the pension amount.
4. What is the exemption available for uncommuted pension received by a family member? The exemption for uncommuted pension is up to Rs. 15,000 or 1/3rd of the uncommuted pension received, whichever is less.
5. Which ITR form should I use for filing my tax returns as a family pensioner? Family pensioners typically use either ITR-1 (Sahaj) or ITR-2, depending on the complexity of their income sources.
9. When is the deadline for filing Income Tax Returns for family pensioners? The deadline for filing ITR for individuals, including family pensioners, is usually July 31st of the assessment year, though it may be extended in certain cases.
10. Where can I find more information or assistance regarding ITR filing for family pension? You can refer to the official website of the Income Tax Department or consult a tax advisor like us for further guidance and assistance specific to your situation.
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