Question

Eligible for income tax family pension how much amount taken for income tax calculation

Answer 1

Pension

Pension received by a retired individual is considered as salary and taxed as, ‘income from salary’. However, pension can be of two types—‘commuted’ and ‘uncommuted’.

Upon retirement, an employee can opt to take a certain percentage of the pension as lump sum. Such pension received, which is received in lump sum, is called commuted pension. For instance, if your monthly pension is Rs20,000 and you decide to take 10% of the next 10 years’ pension as lump sum, or commuted pension, then you would get a lump sum of Rs2.4 lakh (10% of Rs20,000 times 120 months).

In this case, you will receive Rs18,000 as uncommuted pension every month for the first 10 years and after that Rs20,000 every month.