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Central Board of Direct Taxes amends Section 16 of Income Tax Act

The pension received by a taxpayer from his former employer is taxable under the head 'Salaries'.

New Delhi: The Central Board of Direct Taxes (CBDT) on Thursday announced that the Finance Act, 2018 has amended Section 16 of the Income Tax Act, 1961.

The new provision states that a taxpayer having income chargeable under the head 'Salaries' shall be allowed a deduction of Rs 40,000 or the amount of salary, whichever is less, for computing his taxable income.

Representations have been received seeking clarification as to whether a taxpayer, who receives pension from his former employer, shall also be eligible to claim this deduction.

The pension received by a taxpayer from his former employer is taxable under the head 'Salaries'.

Accordingly, any taxpayer who is in receipt of pension from his former employer shall be entitled to claim a deduction of Rs 40,000 or the amount of pension, whichever is less, under Section 16 of the Act.

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