In this guide
How is family pension taxed?
Family pension is generally taxable in the recipient’s hands under Income from Other Sources. It is not reported as salary, even if the deceased person was a government or private-sector employee.
This differs from a pension paid to a retired employee. The employee’s own pension is generally taxed as salary, while family pension paid to a surviving family member is generally reported under other sources.
For AY 2026-27, the income period is 1 April 2025 to 31 March 2026 (FY 2025-26). The deduction discussed here is under Section 57(iia) of the Income-tax Act, 1961. The Income-tax Act, 2025 came into force on 1 April 2026, but it does not change how FY 2025-26 income is reported in an AY 2026-27 return.
Section 57(iia) deduction under each tax regime
A recipient may claim a deduction from taxable family pension under Section 57(iia). The limit depends on the tax regime used:
| Tax regime for AY 2026-27 | Maximum deduction |
|---|---|
| Old tax regime | Lower of one-third of family pension or ₹15,000 |
| New tax regime | Lower of one-third of family pension or ₹25,000 |
The deduction is not a flat exemption of ₹15,000 or ₹25,000 in every case. It is limited to one-third of the family pension, subject to the relevant cap.
The new-regime limit increased to ₹25,000 from AY 2025-26. The old-regime limit remains ₹15,000. The deduction does not increase if the recipient is a senior citizen.
Examples
If a taxpayer receives ₹60,000 as family pension during FY 2025-26, one-third is ₹20,000.
- Old regime: The deduction is limited to ₹15,000, leaving ₹45,000 taxable.
- New regime: The deduction is ₹20,000, leaving ₹40,000 taxable.
If family pension is ₹30,000, one-third is ₹10,000. The deduction is ₹10,000 under either regime, leaving ₹20,000 taxable.
If family pension is ₹1,20,000, one-third is ₹40,000. The deduction is ₹15,000 under the old regime and ₹25,000 under the new regime. The taxable amounts are ₹1,05,000 and ₹95,000, respectively.
The balance is included in the recipient’s total income and taxed under the applicable rules. The deduction does not make the remaining amount tax-free.
Which tax regime should you select?
The new tax regime is the default regime for individuals. Eligible taxpayers may opt for the old regime, subject to the rules and filing requirements that apply to them.
Compare the tax payable under both regimes using your full income and eligible deductions—not just the Section 57(iia) deduction. The old regime may allow deductions that are restricted under the new regime, while the new regime provides a higher family-pension deduction. Either factor may affect the overall comparison.
The comparison should include:
- Family pension after the Section 57(iia) deduction;
- Salary, interest, rent, capital gains and other income;
- Deductions and exemptions available under each regime;
- Applicable tax rates and rebates; and
- Tax already deducted or paid.
If you have no business or professional income, you can generally choose the regime each year, subject to the requirement to exercise the old-regime option by the applicable Section 139(1) return due date. If you have business or professional income, additional rules apply when choosing or changing regimes.
How to calculate taxable family pension
Apply the Section 57(iia) limit for your chosen regime to the family pension received during the financial year:
Taxable family pension = Family pension received − eligible Section 57(iia) deduction
For example, if you received ₹2,40,000 during FY 2025-26, one-third is ₹80,000. The deduction is capped at ₹15,000 under the old regime or ₹25,000 under the new regime. The remaining ₹2,25,000 or ₹2,15,000, respectively, is included under Income from Other Sources.
The deduction is based on the family pension received, not the deceased person’s final salary, pensionable salary or total retirement benefits. Calculate it on the annual amount; do not apply the cap separately to each instalment.
Keep the pension payment statement or annual certificate and check that it agrees with the amount credited to your bank account. If arrears were paid during FY 2025-26, include them as required and check whether relief under Section 89 is available.
When can family pension be exempt?
A specific exemption may apply to certain family-pension receipts. Under Section 10(19), qualifying family pension received by the widow, children or nominated heirs of a member of the armed forces, including paramilitary forces, may be exempt where the death occurred in the course of operational duties in prescribed circumstances.
The exemption depends on the statutory conditions and the facts. Not all pension paid by a government department, defence organisation or employer is exempt. Check the specific provision before excluding an amount from your return. Where an exemption applies, report it in the appropriate exempt-income field of the ITR.
Where to report family pension in the ITR
Report taxable family pension under Income from Other Sources, not under salary. The ITR utility provides a family-pension field and a place to claim the Section 57(iia) deduction.
Choose the return form based on your complete income and eligibility:
| Situation | Return form to check |
|---|---|
| Family pension and other income, with all ITR-1 conditions met | ITR-1 may be available |
| No business or professional income, but an ITR-1 exclusion applies | ITR-2 may be required |
| Business or professional income | ITR-3 may apply |
Receiving family pension alone does not determine which form to use. Capital gains, other income, assets, losses and other eligibility conditions may require ITR-2 or ITR-3. See TaxClear’s ITR form selection guide for AY 2026-27.
Enter the gross family-pension amount and claim the deduction in the designated Section 57(iia) field. Do not report only the net amount after deduction. Follow the AY 2026-27 form and e-filing utility if their field names or validation checks differ from those used in an earlier year.
TDS, tax credit and records
Compare the payer’s pension statement or payment details with your bank credits and tax records. If tax has been deducted, check that the credit appears against your PAN in the relevant tax-credit information before claiming it in your return.
The absence of TDS does not make family pension exempt or remove the need to report it. Tax liability depends on your total taxable income, deductions, tax regime and any applicable relief.
Keep:
- Family-pension sanction or payment details;
- An annual statement or certificate from the payer;
- Bank statements showing receipts;
- Form 26AS and AIS/TIS, where relevant;
- Documents supporting any exemption claimed;
- Details of other income and deductions; and
- Form 10E acknowledgement if claiming Section 89 relief for eligible arrears.
For the online filing process, see TaxClear’s AY 2026-27 ITR filing guide. For arrears or advance family pension, see the Form 10E guide for Section 89 relief.
Family-pension arrears and Section 89 relief
A lump-sum payment may include family-pension arrears relating to earlier years. Arrears are not automatically exempt. If the conditions for relief under Section 89 are met, the recipient may be able to reduce the additional tax arising from receiving arrears in one year.
If you claim Section 89 relief, furnish Form 10E electronically before filing the return. The calculation depends on the amounts received and the tax treatment for the relevant years. Keep the payer’s arrears statement and the information needed to complete the form.
Do not claim relief simply because a payment is substantial or described as arrears. Confirm that the receipt qualifies and that the Form 10E calculation supports the claim.
Common mistakes to avoid
- Reporting family pension as salary instead of income from other sources;
- Claiming the full ₹15,000 or ₹25,000 when one-third of the pension is lower;
- Using the new-regime limit when calculating tax under the old regime;
- Assuming senior citizens get a higher Section 57(iia) limit;
- Reporting only the net pension instead of the gross amount and deduction separately;
- Assuming all government or defence family pension is exempt;
- Leaving family pension out of the return because no TDS was deducted; and
- Claiming relief on arrears without first furnishing Form 10E.
Frequently asked questions
Is family pension taxable in India?
Generally, yes. It is usually taxable as Income from Other Sources, after the Section 57(iia) deduction and any specific exemption that applies.
What is the family-pension deduction for AY 2026-27?
Under the old regime, it is the lower of one-third of family pension or ₹15,000. Under the new regime, it is the lower of one-third of family pension or ₹25,000.
Does family pension count as salary?
No. Family pension received by a family member is generally reported under Income from Other Sources. A pension paid to the retired employee is generally treated as salary.
Does a senior citizen get a higher family-pension deduction?
No. The Section 57(iia) limits do not increase based on the recipient’s age.
Which ITR form should I use?
ITR-1 may be available if you meet all its conditions. ITR-2 may be required if an ITR-1 exclusion applies and you have no business or professional income. ITR-3 may apply if you have business or professional income.
Is family pension from the armed forces always exempt?
No. The Section 10(19) exemption applies only to qualifying cases and depends on the statutory conditions, including the recipient and the circumstances of the service member’s death.
