Is Family Pension Taxable or Exempt in India 2025?

Losing a loved one is never easy, and managing finances after that can be quite difficult. With a family pension, the deceased person’s (salaried or retired) family receives regular financial support to make it easy to cope.

But there’s always that question with taxes: is family pension taxable or exempt? Let’s understand what relief you can claim under income tax rules.

What Is Family Pension?

A family pension is essentially regular payment made by an employer or government to the dependents of a deceased employee. A normal pension, comparatively, involves the employee receiving financial aid after retirement.

Under family pension, the pension is paid to the spouse, children, or dependent parents of the deceased. This helps them with the family’s financial stability, especially when the primary earning member is no longer around.

Is Family Pension Taxable or Exempt in India?

Now, for the main question, “Is family pension taxable or exempt?” While family pension is taxable, there’s partial relief under the Income Tax Act that can be availed.

Family pension is taxed under ‘Income from Other Sources,’ and not directly as salary income. To ease the tax burden, however, the law provides for a standard deduction on family pension income. This means you can claim a deduction of one-third of the pension amount or Rs. 15,000, whichever is less. The remaining amount after this deduction is taxable according to your income slab.

For instance, if your family pension is Rs. 60,000 in a year,

• One-third of Rs. 60,000 is Rs. 20,000
• Or you can consider the deduction to be Rs. 15,000

If you consider the latter, your taxable family pension will be Rs.60,000 minus Rs. 15,000, which is Rs. 45,000. This shows that the deduction provides a small but helpful tax relief.

Family Pension for Government Employees

For Central and State Government employees, the tax policy might differ slightly. This is on account of certain government pension schemes that offer extra benefits or exemptions based on the department or rules in place.

Check your pension details and Form 16 to understand your pension scheme better.

How to Report Family Pension in ITR in 2025

• When you file your Income Tax Return (ITR), report your family pension under ‘Income from Other Sources’.
• Claim the deduction of Rs.15,000 or one-third of the pension amount, whichever is less. 
• Keep your pension slips, Form 16, and bank statements handy in case you receive any queries from the Income Tax Department.

Key Takeaways

The simple answer to ‘Is family pension taxable or exempt?’ is yes, it’s partly taxable. But, you can claim a fixed deduction to reduce the tax burden. Having a pension plan in place that includes a family pension ensures that to will receive financial support even after you’re gone.

A little clarity on tax rules can go a long way in keeping your family’s finances in check and running smoothly.